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| 1ST FINANCIAL SERVICES CORPORATION                         |
|------------------------------------------------------------|
| (Exact name of the registrant as specified in its charter) |

| NORTH CAROLINA                                            |   | 000-53264      |   | 26-0207901                           |
|----------------------------------------------------------------|--------|--------------------------|--------|--------------------------------------|
| (State or Other Jurisdiction of Incorporation or Organization) |   | (Commission File Number) |   | (I.R.S. Employer Identification No.) |

|   | Large Accelerated Filer | o      | Accelerated Filer    | o      |
|--------|-------------------------|--------|---------------------------|--------|
|   |                    |   |                      |
|   | Non-accelerated Filer   | o      | Smaller Reporting Company | þ |

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| 1st Financial Services Corporation |
|------------------------------------|

Index

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|                                          |                                                                                                                            | Page Number |   |
|-----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-------------|--------|
|                                          |                                                                                                                            |        |   |
| PART I   FINANCIAL INFORMATION |
|                                          |
| Item 1                                        | Financial Statements                                                                                                            |        |   |   |   |
|                                          |                                                                                                                            |        |   |   |   |
|                                          | Consolidated Balance Sheets March 31, 2011 (Unaudited) and December 31, 2010                                               |        |   | 3 |   |
|                                          |                                                                                                                            |        |   |   |   |
|                                          | Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010 (Unaudited)                       |        |   | 4 |   |
|                                          |                                                                                                                            |        |   |   |   |
|                                          | Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2011 and 2010 (Unaudited) |        |   | 5 |   |
|                                          |                                                                                                                            |        |   |   |   |
|                                          | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 (Unaudited)                            |        |   | 6 |   |
|                                          |                                                                                                                            |        |   |   |   |
|                                          | Notes to Consolidated Financial Statements (Unaudited)                                                                          |        |   | 7 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 2                                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                |        |   | 37 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 3                                        | Quantitative and Qualitative Disclosures about Market Risk                                                                      |        |   | 57 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 4                                        | Controls and Procedures                                                                                                         |        |   | 57 |   |
|                                          |                                                                                                                            |        |   |   |   |
| PART II  OTHER INFORMATION               |
|                                          |                                                                                                                            |        |   |   |   |
| Item 1                                        | Legal Proceedings                                                                                                          |        |   | 58 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 1A                                       | Risk Factors                                                                                                                    |        |   | 58 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 2                                   | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |        |   | 58 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 3                                        | Defaults upon Senior Securities                                                                                                 |        |   | 58 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 4                                   | (Removed and Reserved)                                                                                                          |        |   | 58 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 5                                        | Other Information                                                                                                               |        |   | 58 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Item 6                                        | Exhibits                                                                                                                        |        |   | 58 |   |
|                                          |                                                                                                                            |        |   |   |   |
| Signatures                                    |                                                                                                                            |        |   | 59 |   |

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Table of Contents

| PART I – FINANCIAL INFORMATION |
|--------------------------------------|

| ITEM 1. FINANCIAL STATEMENTS |
|------------------------------|

| 1st Financial Services Corporation |
|------------------------------------|

Consolidated Balance Sheets

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|                                                                                                           |   | March 31, |    |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------|--------|-----------|---------|--------|--------------|--------|
| (dollars in thousands, except share and per share data)                                                        |   | 2011      |    |   | 2010         |   |
| Assets                                                                                                         |   |      |    |   |         |   |
| Cash and noninterest-bearing bank deposits                                                                     |   | $         | 15,073  |   |         | $      | 14,783 |   |
| Due from Federal Reserve Bank                                                                                  |   |      | 52,175  |   |         |   | 36,140 |   |
| Interest-bearing deposits with banks                                                                           |   |      | 6,479   |   |         |   | 6,475 |   |
| Total cash and cash equivalents                                                                                |   |      | 73,727  |   |         |   | 57,398 |   |
| Investment securities available for sale                                                                       |   |      | 135,000 |   |         |   | 130,414 |   |
| Investment securities held to maturity (fair value of $3,941at March 31, 2011 and $2,742 at December 31, 2010) |   |      | 3,964   |   |         |   | 2,765 |   |
| Restricted equity securities                                                                                   |   |      | 5,516   |   |         |   | 5,516 |   |
| Loans held for sale                                                                                            |   |      | 3,396   |   |         |   | 11,026 |   |
| Portfolio loans                                                                                                |   |      | 479,179 |   |         |   | 486,195 |   |
| Allowance for loan losses                                                                                      |   |      | (13,905 | )      |         |   | (16,191 | ) |
| Net portfolio loans                                                                                            |   |      | 465,274 |   |         |   | 470,004 |   |
| Bank-owned life insurance                                                                                      |   |      | 12,624  |   |         |   | 12,517 |   |
| Property and equipment, net                                                                                    |   |      | 5,649   |   |         |   | 5,928 |   |
| Accrued interest receivable                                                                                    |   |      | 2,353   |   |         |   | 2,356 |   |
| Investment in real estate partnership                                                                          |   |      | 6,356   |   |         |   | 6,356 |   |
| Foreclosed real estate                                                                                         |   |      | 5,942   |   |         |   | 7,314 |   |
| Other assets                                                                                                   |   |      | 10,686  |   |         |   | 13,210 |   |
| Total assets                                                                                                   |   | $         | 730,487 |   |         | $      | 724,804 |   |
| Liabilities and Stockholders’ Equity                                                                     |   |      |    |   |         |   |   |   |
| Liabilities                                                                                                    |   |      |    |   |         |   |   |   |
| Demand deposits                                                                                                |   | $         | 71,571  |   |         | $      | 65,398 |   |
| NOW accounts                                                                                                   |   |      | 62,901  |   |         |   | 66,831 |   |
| Savings deposits                                                                                               |   |      | 116,688 |   |         |   | 111,553 |   |
| Money market accounts                                                                                          |   |      | 48,883  |   |         |   | 48,801 |   |
| Time deposits under $100                                                                                       |   |      | 200,422 |   |         |   | 200,061 |   |
| Time deposits of $100 and greater                                                                              |   |      | 173,082 |   |         |   | 181,693 |   |
| Total deposits                                                                                                 |   |      | 673,547 |   |         |   | 674,337 |   |
| Federal funds purchased and securities sold under agreements to repurchase                                     |   |      | 868     |   |         |   | 704 |   |
| Other borrowings                                                                                               |   |      | 3,952   |   |         |   | 7,571 |   |
| Accrued interest payable                                                                                       |   |      | 1,412   |   |         |   | 1,865 |   |
| Due to broker                                                                                                  |   |      | 10,153  |   |         |   | - |   |
| Other liabilities                                                                                              |   |      | 2,932   |   |         |   | 2,995 |   |
| Total liabilities                                                                                              |   |      | 692,864 |   |         |   | 687,472 |   |
| Stockholders’ equity                                                                                     |   |      |    |   |         |   |   |   |
| Preferred stock, no par value; 10,000,000 shares authorized;                                                   |   |      |    |   |         |   |   |   |
| 16,369 shares issued and outstanding at March 31, 2011 and   December 31, 2010                  |   |      | 15,836  |   |         |   | 15,786 |   |
| Common stock, $5.00 par value; 35,000,000 shares authorized;                                                   |   |      |    |   |         |   |   |   |
| 5,082,058 and 5,097,058 shares issued and outstanding at                                                       |   |      |    |   |         |   |   |   |
| March 31, 2011 and December 31, 2010, respectively                                                             |   |      | 25,410  |   |         |   | 25,485 |   |
| Common stock warrant                                                                                           |   |      | 1,016   |   |         |   | 1,016 |   |
| Additional paid-in capital                                                                                     |   |      | 17,566  |   |         |   | 17,533 |   |
| Retained deficit                                                                                               |   |      | (21,011 | )      |         |   | (21,563 | ) |
| Accumulated other comprehensive loss                                                                           |   |      | (1,194  | )      |         |   | (925 | ) |
| Total stockholders’ equity                                                                               |   |      | 37,623  |   |         |   | 37,332 |   |
| Total liabilities and stockholders’ equity                                                               |   | $         | 730,487 |   |         | $      | 724,804 |   |

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Table of Contents

Consolidated Statements of Operations

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|                                                                       |   | Three Months Ended March 31 |      |
|----------------------------------------------------------------------------|--------|-----------------------------|-----------|
| (dollars in thousands, except per share data)                              |   | 2011                        |      |   | 2010 |   |
| Interest income                                                            |   |                        |      |   |   |   |
| Loans and fees on loans                                                    |   | $                           | 6,082     |   |   | $ | 7,175 |   |
| Investment securities                                                      |   |                        | 1,004     |   |   |   | 544 |   |
| Due from Federal Reserve Bank                                              |   |                        | 21        |   |   |   | 78 |   |
| Interest-earning deposits with banks                                       |   |                        | 18        |   |   |   | - |   |
| Total interest income                                                      |   |                        | 7,125     |   |   |   | 7,797 |   |
| Interest expense                                                           |   |                        |      |   |   |   |   |   |
| Deposits                                                                   |   |                        | 2,030     |   |   |   | 2,624 |   |
| Federal funds purchased and securities sold under agreements to repurchase |   |                        | 2         |   |   |   | 2 |   |
| Other borrowings                                                           |   |                        | 11        |   |   |   | 179 |   |
| Total interest expense                                                     |   |                        | 2,043     |   |   |   | 2,805 |   |
| Net interest income                                                        |   |                        | 5,082     |   |   |   | 4,992 |   |
| Provision for loan losses                                                  |   |                        | 686       |   |   |   | 300 |   |
| Net interest income after provision for loan losses                        |   |                        | 4,396     |   |   |   | 4,692 |   |
| Noninterest income                                                         |   |                        |      |   |   |   |   |   |
| Service charges on deposit accounts                                        |   |                        | 591       |   |   |   | 535 |   |
| Mortgage services revenue                                                  |   |                        | 570       |   |   |   | 323 |   |
| Other service charges and fees                                             |   |                        | 147       |   |   |   | 111 |   |
| Increase in cash surrender value of life insurance                         |   |                        | 107       |   |   |   | 113 |   |
| Gain on investment securities, net                                         |   |                        | 9         |   |   |   | 123 |   |
| USDA/SBA loan sale and servicing revenue                                   |   |                        | 212       |   |   |   | 21 |   |
| Other income                                                               |   |                        | 29        |   |   |   | 5 |   |
| Total noninterest income                                                   |   |                        | 1,665     |   |   |   | 1,231 |   |
| Noninterest expense                                                        |   |                        |      |   |   |   |   |   |
| Salaries and employee benefits                                             |   |                        | 2,352     |   |   |   | 2,456 |   |
| Occupancy                                                                  |   |                        | 368       |   |   |   | 416 |   |
| Equipment                                                                  |   |                        | 245       |   |   |   | 324 |   |
| Advertising                                                                |   |                        | 52        |   |   |   | 148 |   |
| Data processing and telecommunications                                     |   |                        | 511       |   |   |   | 481 |   |
| Deposit insurance premiums                                                 |   |                        | 550       |   |   |   | 660 |   |
| Professional fees                                                          |   |                        | 157       |   |   |   | 235 |   |
| Printing and supplies                                                      |   |                        | 44        |   |   |   | 68 |   |
| Foreclosed real estate                                                     |   |                        | 361       |   |   |   | 194 |   |
| Loan legal                                                                 |   |                        | 130       |   |   |   | 29 |   |
| Loan appraisal                                                             |   |                        | 86        |   |   |   | 34 |   |
| Corporate insurance                                                        |   |                        | 51        |   |   |   | 18 |   |
| Other                                                                      |   |                        | 311       |   |   |   | 361 |   |
| Total noninterest expense                                                  |   |                        | 5,218     |   |   |   | 5,424 |   |
| Income before income taxes                                                 |   |                        | 843       |   |   |   | 499 |   |
| Income tax expense                                                         |   |                        | 241       |   |   |   | 151 |   |
| Net income                                                                 |   |                        | 602       |   |   |   | 348 |   |
| Accretion of preferred stock to redemption value                           |   |                        | 50        |   |   |   | 50 |   |
| Dividends on preferred stock                                               |   |                        | 204       |   |   |   | 204 |   |
| Net income available to common stockholders                                |   | $                           | 348       |   |   | $ | 94 |   |
|                                                                       |   |                        |      |   |   |   |   |   |
| Basic net income per share                                                 |   | $                           | 0.07      |   |   | $ | 0.02 |   |
| Diluted net income per share                                               |   | $                           | 0.07      |   |   | $ | 0.02 |   |
| Basic weighted average shares outstanding                                  |   |                        | 5,087,058 |   |   |   | 5,017,816 |   |
| Diluted weighted average shares outstanding                                |   |                        | 5,087,058 |   |   |   | 5,017,816 |   |

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Table of Contents

Consolidated Statements of Changes in Stockholders’ Equity 

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| (dollars in thousands, except share data)                                                 |   |         |      |   |            |   |   |               |   |   |     |   |   |                                   |   |   |
|------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|-----------------|--------|--------|--------------------|--------|--------|----------|--------|--------|----------------------------------------|--------|--------|
|                                                                                           |   | Common Stock |      |   | Preferred Stock |   |   | Additional Paid-in |   |   | Retained |   |   | Accumulated Other Comprehensive Income |   |   |   |   |
|                                                                                           |   | Shares       |      |   | Amount          |   |   | Warrant            |   |   | Shares   |   |   | Amount                                 |   |   | Capital |   |   | Deficit |   |   | (Loss) |   |   | Total |   |
| Balance, December 31, 2009                                                                     |   |         | 5,010,117 |   |            | $      | 25,050 |               |   | $      | 1,016    |   |   |                                   | 16,369 |   |   | $ | 15,583 |   |   | $ | 17,804 |   |   | $ | (15,648 | ) |   | $ | (43 | ) |   | $ | 43762 |   |
| Issuance of common stock                                                                       |   |         | 8,732     |   |            |   | 34     |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | (19 | ) |   |   | - |   |   |   | - |   |   |   | 15 |   |
| Compensation expense related to stock option plan                                              |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | 4 |   |   |   | - |   |   |   | - |   |   |   | 4 |   |
| Compensation expense related to restricted stock plan                                          |   |         | -         |   |            |   | 10     |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 10 |   |
| Preferred dividend                                                                             |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | (204 | ) |   |   | - |   |   |   | (204 | ) |
| Accretion of preferred stock to redemption value                                               |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | 50 |   |   |   | - |   |   |   | (50 | ) |   |   | - |   |   |   | - |   |
| Comprehensive income                                                                           |   |         |      |   |            |   |   |               |   |   |     |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                     |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | 348 |   |   |   | - |   |   |   | 348 |   |
| Net unrealized gain on investment securities available for sale, net of income taxes of $101   |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 162 |   |   |   | 162 |   |
| Reclassification adjustment for gains included in net income, net of income taxes of $(47)     |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (76 | ) |   |   | (76 | ) |
| Total comprehensive income                                                                     |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 434 |   |
| Balance, March 31, 2010                                                                        |   |         | 5,018,849 |   |            | $      | 25,094 |               |   | $      | 1,016    |   |   |                                   | 16,369 |   |   | $ | 15,633 |   |   | $ | 17,789 |   |   | $ | (15,554 | ) |   | $ | 43 |   |   | $ | 44,021 |   |
|                                                                                           |   |         |      |   |            |   |   |               |   |   |     |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010                                                                     |   |         | 5,097,058 |   |            | $      | 25,485 |               |   | $      | 1,016    |   |   |                                   | 16,369 |   |   | $ | 15,786 |   |   | $ | 17,533 |   |   | $ | (21,563 | ) |   | $ | (925 | ) |   | $ | 37,332 |   |
| Common stock cancelled pursuant to restricted stock plan                                       |   |         | (15,000   | )      |            |   | (75    | )                  |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | 63 |   |   |   | - |   |   |   | - |   |   |   | (12 | ) |
| Compensation expense related to stock option plan                                              |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | (40 | ) |   |   | - |   |   |   | - |   |   |   | (40 | ) |
| Compensation expense related to restricted stock plan                                          |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | 10 |   |   |   | - |   |   |   | - |   |   |   | 10 |   |
| Accretion of preferred stock to redemption value                                               |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | 50 |   |   |   | - |   |   |   | (50 | ) |   |   | - |   |   |   | - |   |
| Comprehensive income                                                                           |   |         |      |   |            |   |   |               |   |   |     |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                     |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | 602 |   |   |   | - |   |   |   | 602 |   |
| Net unrealized loss on investment securities available for sale, net of income taxes of $(168) |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (269 | ) |   |   | (269 | ) |
| Total comprehensive income                                                                     |   |         | -         |   |            |   | -      |               |   |   | -        |   |   |                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 333 |   |
| Balance, March 31, 2011                                                                        |   |         | 5,082,058 |   |            | $      | 25,410 |               |   |   | 1,016    |   |   |                                   | 16,369 |   |   | $ | 15,836 |   |   | $ | 17,566 |   |   | $ | (21,011 | ) |   | $ | (1,194 | ) |   | $ | 37,623 |   |

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Table of Contents

Consolidated Statements of Cash Flows

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|                                                                              |   | Three Months Ended March 31 |    |
|-----------------------------------------------------------------------------------|--------|-----------------------------|---------|
| (dollars in thousands)                                                            |   | 2011                        |    |   | 2010 |   |
| Cash flows from operating activities                                              |   |                        |    |   |   |   |
| Net income                                                                        |   | $                           | 602     |   |   | $ | 348 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                        |    |   |   |   |   |   |
| Depreciation                                                                      |   |                        | 280     |   |   |   | 316 |   |
| Provision for loan losses                                                         |   |                        | 686     |   |   |   | 300 |   |
| Deferred income taxes                                                             |   |                        | 316     |   |   |   | 381 |   |
| Amortization of premium on securities, net of discount accretion                  |   |                        | 133     |   |   |   | 366 |   |
| Origination of held-for-sale loans                                                |   |                        | (21,554 | ) |   |   | (12,814 | ) |
| Proceeds from sales of held-for-sale loans                                        |   |                        | 29,698  |   |   |   | 16,064 |   |
| Net gains on investment securities                                                |   |                        | (9      | ) |   |   | (123 | ) |
| Net gains on sales of USDA and SBA loans                                          |   |                        | (201    | ) |   |   | (21 | ) |
| Net gains on sales of held-for-sale loans                                         |   |                        | (514    | ) |   |   | (303 | ) |
| Net loss on sale of foreclosed real estate                                        |   |                        | 305     |   |   |   | 34 |   |
| Net loss on sale or disposal of equipment                                         |   |                        | 1       |   |   |   | 57 |   |
| Stock compensation expense (benefit)                                              |   |                        | (42     | ) |   |   | 4 |   |
| Writedown of foreclosed real estate                                               |   |                        | -       |   |   |   | 91 |   |
| Increase in cash surrender value of bank-owned life insurance                     |   |                        | (107    | ) |   |   | (113 | ) |
| Changes in assets and liabilities:                                                |   |                        |    |   |   |   |   |   |
| Accrued interest receivable                                                       |   |                        | 3       |   |   |   | (20 | ) |
| Other assets                                                                      |   |                        | 2,376   |   |   |   | 359 |   |
| Accrued interest payable                                                          |   |                        | (453    | ) |   |   | 347 |   |
| Other liabilities                                                                 |   |                        | (63     | ) |   |   | 1,313 |   |
| Net cash provided by operating activities                                         |   |                        | 11,457  |   |   |   | 6,586 |   |
| Cash flows from investing activities                                              |   |                        |    |   |   |   |   |   |
| Purchases of investment securities available for sale                             |   |                        | (11,434 | ) |   |   | (7,147 | ) |
| Sales of investment securities available for sale                                 |   |                        | -       |   |   |   | 8,367 |   |
| Maturities of investment securities available for sale                            |   |                        | 2,650   |   |   |   | 3,907 |   |
| Calls of investment securities available for sale                                 |   |                        | 13,791  |   |   |   | - |   |
| Maturities of investment securities held to maturity                              |   |                        | 50      |   |   |   | - |   |
| Proceeds from sale of branch                                                      |   |                        | -       |   |   |   | 4,512 |   |
| Proceeds from sale of other real estate                                           |   |                        | 1,298   |   |   |   | 120 |   |
| Improvements to foreclosed assets                                                 |   |                        | -       |   |   |   | (125 | ) |
| Net decrease in loans                                                             |   |                        | 2,764   |   |   |   | 7,702 |   |
| Purchases of property and equipment                                               |   |                        | (2      | ) |   |   | (18 | ) |
| Net cash provided by investing activities                                         |   |                        | 9,117   |   |   |   | 17,318 |   |
| Cash flows from financing activities                                              |   |                        |    |   |   |   |   |   |
| Proceeds from the issuance of common stock                                        |   |                        | -       |   |   |   | 25 |   |
| Net increase (decrease) in deposits                                               |   |                        | (790    | ) |   |   | 11,330 |   |
| Net increase (decrease) in securities sold under agreements                       |   |                        |    |   |   |   |   |   |
| to repurchase and federal funds purchased                                         |   |                        | 164     |   |   |   | (297 | ) |
| Net decrease in other borrowings                                                  |   |                        | (3,619  | ) |   |   | - |   |
| Dividends paid on preferred stock                                                 |   |                        | -       |   |   |   | (204 | ) |
| Net cash provided by (used in) financing activities                               |   |                        | (4,245  | ) |   |   | 10,854 |   |
| Net increase in cash and cash equivalents                                         |   |                        | 16,329  |   |   |   | 34,758 |   |
| Cash and cash equivalents, beginning of year                                      |   |                        | 57,398  |   |   |   | 121,830 |   |
| Cash and cash equivalents, end of year                                            |   | $                           | 73,727  |   |   | $ | 156,588 |   |
|                                                                              |   |                        |    |   |   |   |   |   |
| Supplemental disclosure of cash flow information                                  |   |                        |    |   |   |   |   |   |
| Transfer of loans to foreclosed real estate                                       |   | $                           | 231     |   |   | $ | 1,517 |   |
| Transfer of loans to repossessed assets                                           |   |                        | -       |   |   |   | 73 |   |
| Transfer of loans to held-to-maturity securities                                  |   |                        | 1,250   |   |   |   | - |   |
|     Sales of nonaccrual loans                                 |   |                        | 969     |   |   |   | 677 |   |

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|   | ● |   | enhance its supervision of the Bank’s activities. |
|--------|---------|--------|---------------------------------------------------------|

|   | ● |   | assess the management team to ensure executive officers have the skills, training, abilities and experience needed. |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | develop and implement a plan for achieving and maintaining Tier 1 Capital of at least 8% of total assets, a Total Risk Based Capital Ratio of at least 12% and a fully funded allowance for loan and lease losses. |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | ● |   | strengthen the Allowance policy of the Bank. |
|--------|---------|--------|----------------------------------------------|

|   | ● |   | develop and implement a strategic plan. |
|--------|---------|--------|-----------------------------------------|

|   | ● |   | not extend additional credit to any borrower who had a loan with the Bank that was charged off or who has a current loan that is classified “Loss” or “Doubtful”. |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | formulate a detailed plan to collect, charge off or improve the quality of each of its “Substandard” or “Doubtful” loans. |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | reduce loans in excess of $250,000 and classified as “Substandard” or “Doubtful” in accordance with a schedule required by the supervisory authorities. |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | cause full implementation of its loan underwriting, loan administration, loan documentation and loan portfolio management policies. |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | adopt a loan review and grading system. |
|--------|---------|--------|-----------------------------------------|

|   | ● |   | develop a plan to systematically reduce the concentration in a limited group of borrowers. |
|--------|---------|--------|--------------------------------------------------------------------------------------------|

|   | ● |   | enhance its review of its liquidity and implement a liquidity contingency and asset/liability management plan. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------|

|   | ● |   | implement a plan and 2010 budget designed to improve and sustain earnings. |
|--------|---------|--------|----------------------------------------------------------------------------|

|   | ● |   | implement internal routine and control policies addressing concerns to enhance its safe and sound operation. |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------|

|   | ● |   | implement a comprehensive internal audit program and cause an effective system of internal and external audits to be in place. |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | implement a policy for managing its “owned real estate”. |
|--------|---------|--------|----------------------------------------------------------------------|

|   | ● |   | forebear from soliciting and accepting “brokered deposits” without approval. |
|--------|---------|--------|------------------------------------------------------------------------------------------|

|   | ● |   | limit growth to 10% per year. |
|--------|---------|--------|-----------------------------------------|

|   | ● |   | not pay dividends without prior approval. |
|--------|---------|--------|-------------------------------------------|

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|   | ● |   | implement policies to enhance the handling of transactions with officers and directors. |
|--------|---------|--------|-----------------------------------------------------------------------------------------|

|   | ● |   | correct any violations of laws and regulations. |
|--------|---------|--------|-------------------------------------------------|

|   | ● |   | make quarterly progress reports.  |
|--------|---------|--------|----------------------------------------|

|   | ● |   | take appropriate steps to fully utilize the Company’s financial and managerial resources, to serve as a source of strength to the Bank. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | not declare or pay any dividends without approval. |
|--------|---------|--------|----------------------------------------------------|

|   | ● |   | not directly or indirectly take dividends from the Bank without approval. |
|--------|---------|--------|---------------------------------------------------------------------------|

|   | ● |   | not directly or indirectly, incur, increase, or guarantee any debt without approval . |
|--------|---------|--------|---------------------------------------------------------------------------------------|
|   | ● |   | not directly or indirectly, purchase or redeem any shares of  its stock without approval. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------|
|    | ● |   | comply with the notice provisions of the Federal Deposit Insurance Act and Regulation Y of the Board of Governors of the Federal Reserve System related to changes in executive officers and compensation matters. |
|--------------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● |   | submit a written capital plan that is acceptable to the Federal Reserve Bank, implement the approved plan, and thereafter fully comply with it. |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

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| (in thousands)              |   |           |    |
|----------------------------------|--------|----------------|---------|
|                             |   | March 31, 2011 |    |
|                             |   |           |    |   | Gross |   |   | Gross |   |   |   |   |
|                             |   | Amortized      |    |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                             |   | Cost           |    |   | Gains |   |   | Losses |   |   | Value |   |
| U.S. government agencies         |   | $              | 7,266   |   |   | $ | 43 |   |   | $ | 82 |   |   | $ | 7,227 |   |
| Government sponsored enterprises |   |           | 38,603  |   |   |   | 3 |   |   |   | 1,259 |   |   |   | 37,347 |   |
| Mortgage-backed securities       |   |           | 91,074  |   |   |   | 296 |   |   |   | 944 |   |   |   | 90,426 |   |
| Total                            |   | $              | 136,943 |   |   | $ | 342 |   |   | $ | 2,285 |   |   | $ | 135,000 |   |

|                             |   |   |              |   |   |       |   |   |       |   |   |
|----------------------------------|--------|--------|-------------------|--------|--------|------------|--------|--------|------------|--------|--------|
|                             |   |   | December 31, 2010 |   |
|                             |   |   |              |   |   | Gross      |   |   | Gross      |   |   |   |   |   |
|                             |   |   | Amortized         |   |   | Unrealized |   |   | Unrealized |   |   |   | Fair |   |
|                             |   |   | Cost              |   |   | Gains      |   |   | Losses     |   |   |   | Value |   |
| U.S. government agencies         |   | $      | 5,392             |   |   | $          | 2      |   |       | $      | 71     |   |   | $ | 5,323 |   |
| Government sponsored enterprises |   |   | 45,026            |   |   |       | 62     |   |       |   | 1,049  |   |   |   | 44,039 |   |
| Mortgage-backed securities       |   |   | 81,501            |   |   |       | 387    |   |       |   | 836    |   |   |   | 81,052 |   |
| Total                            |   | $      | 131,919           |   |   | $          | 451    |   |       | $      | 1,956  |   |   | $ | 130,414 |   |

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| (in thousands)                    |           |   |
|-----------------------------------|----------------|--------|
|                              | March 31, 2011 |   |
|                              |           |   | Gross |   | Gross |   |   |   |
|                              | Amortized      |   | Unrealized |   | Unrealized |   | Fair |   |
|                              | Cost           |   | Gains |   | Losses |   | Value |   |
| States and political subdivisions |           | $      | 2,714 |   |   | $ | 49 |   |   | $ | 72 |   |   | $ | 2,691 |   |
| Other debt securities             |           |   | 1,250 |   |   |   | - |   |   |   | - |   |   |   | 1,250 |   |
| Total                             |           | $      | 3,964 |   |   | $ | 49 |   |   | $ | 72 |   |   | $ | 3,941 |   |

|                              |   |              |   |
|-----------------------------------|--------|-------------------|--------|
|                              |   | December 31, 2010 |   |
|                              |   |              |   |   | Gross |   |   | Gross |   |   |   |   |
|                              |   | Amortized         |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                              |   | Cost              |   |   | Gains |   |   | Losses |   |   | Value |   |
|                              |   |              |   |   |   |   |   |   |   |   |   |   |
| States and political subdivisions |   | $                 | 2,765  |   |   | $ | 43 |   |   | $ | 66 |   |   | $ | 2,742 |   |
| Total                             |   | $                 | 2,765  |   |   | $ | 43 |   |   | $ | 66 |   |   | $ | 2,742 |   |

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| (in thousands)                   |   |                |   |
|----------------------------------|--------|---------------------|--------|
|                             |   | March 31, 2011      |   |
|                             |   | Less Than 12 Months |   |   | 12 Months or More |   |   | Total |   |
|                             |   | Fair                |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                             |   | Value               |   |   | Losses |   |   | Value |   |   | Losses |   |   | Value |   |   | Losses |   |
| U. S. government agencies        |   | $                   | 1,946  |   |   | $ | 3 |   |   | $ | 2,402 |   |   | $ | 79 |   |   | $ | 4,348 |   |   | $ | 82 |   |
| Government sponsored enterprises |   |                | 34,996 |   |   |   | 1,259 |   |   |   | - |   |   |   | - |   |   |   | 34,996 |   |   |   | 1,259 |   |
| Mortgage-backed securities       |   |                | 43,520 |   |   |   | 944 |   |   |   | - |   |   |   | - |   |   |   | 43,520 |   |   |   | 944 |   |
| Total                            |   | $                   | 80,462 |   |   | $ | 2,206 |   |   | $ | 2,402 |   |   | $ | 79 |   |   | $ | 82,864 |   |   | $ | 2,285 |   |

| (in thousands)                    |   |
|-----------------------------------|--------|
|                              |   | March 31, 2011 |   |
|                              |   | Less Than 12 Months |   |   | 12 Months or More |   |   | Total |   |
|                              |   | Fair |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                              |   | Value |   |   | Losses |   |   | Value |   |   | Losses |   |   | Value |   |   | Losses |   |
| States and political subdivisions |   | $ | 2,691 |   |   | $ | 72 |   |   | $ | - |   |   | $ | - |   |   | $ | 2,691 |   |   | $ | 72 |   |
| Total                             |   | $ | 2,691 |   |   | $ | 72 |   |   | $ | - |   |   | $ | - |   |   | $ | 2,691 |   |   | $ | 72 |   |

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| (in thousands)                  |   |
|---------------------------------|--------|
|                            |   | March 31, |   |   | December 31, |   |
|                            |   | 2011 |   |   | 2010 |   |
| Real estate:                    |   |   |   |   |   |   |
| Construction and development    |   | $ | 111,145 |   |   | $ | 114,532 |   |
| 1-4 family residential          |   |   | 120,395 |   |   |   | 120,217 |   |
| Mutlifamily                     |   |   | 5,883 |   |   |   | 6,417 |   |
| Farmland                        |   |   | 960 |   |   |   | 965 |   |
| Nonfarm, nonresidential         |   |   | 173,874 |   |   |   | 173,326 |   |
| Total real estate               |   |   | 412,257 |   |   |   | 415,457 |   |
| Commercial and industrial loans |   |   | 62,728 |   |   |   | 66,254 |   |
| Consumer                        |   |   | 4,194 |   |   |   | 4,484 |   |
|                            |   |   | 479,179 |   |   |   | 486,195 |   |
| Allowance for loan losses       |   |   | (13,905 | ) |   |   | (16,191 | ) |
| Total                           |   | $ | 465,274 |   |   | $ | 470,004 |   |

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| ·   | Rating 1 –Extremely Low Risk.  Low Risk Assets are of the highest quality with an unquestioned capacity for repayment.  These borrowers are generally international, national, or regional in scope and the debt rating, if available, is AAA  (S&P) or Aaa (Moody’s).  The borrower has ready access to all public financing markets.  Management has a demonstrated successful track record and a succession plan is in place for highly qualified replacements.  Financial statements are audited without qualification by reputable CPA firms.  Loans are also considered extremely low risk prime when the collateral consists of properly margined Bank CDs and shorter-term U.S. government securities. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rating 2 -Minimal Risk.  Minimal Risk Assets have a history of consistently superior earnings and cash flow.  Very strong liquidity, and low leverage.  The balance sheet is well capitalized and the secondary source of repayment is well defined and of unquestioned quality.  These borrowers also have ready access to all public finance markets as evidenced by debt ratings, if available, of AA (S&P) or Aaa (Moody’s).  These assets can also be those secured by properly margined long term U.S. government bonds. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rating 3 –Moderate Risk.   Moderate Risk assets have consistently satisfactory earnings and cash flow.  They possess no disclosed weaknesses; however, financial analysis reveals factors such as leverage, liquidity, or debt service to be less than optimal or susceptible to changes in the business cycle.  Access to other financing sources exists and private placement may be possible.  Unqualified audited statements are preferred; however reviewed statements are also acceptable.  The borrower may not be able to survive a significant downturn; however, the debt is supported by high quality unrestricted liquid collateral. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rating 4 –Satisfactory Risk.  Satisfactory Risk assets possess adequate earnings, cash flow, leverage, and capital when compared to their industry.  Debt service does not place an undue strain on the business.  The borrower is not strong enough to sustain major financial setbacks.  The asset has a readily apparent weakness such as being relatively new, new management with an unproven track record, low liquidity or equity, volatile profitability and cash flow.  Guarantor(s) and collateral that provide an acceptable and readily quantifiable secondary source of repayment always support these assets. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rating 5 –Acceptable Risk – “Management Watch.”   Acceptable Risk Assets are those that warrant closer than normal attention due to adverse conditions affecting the borrower, the borrowers industry, or the general economic environment.  Above average risk is reflected through erratic earnings and cash flow, inconsistent debt service coverage, or strained liquidity or leverage.  Uncertain events may have taken place such as unanticipated management changes or pending litigation that could have a significant negative impact.  Collateral and/or guarantor(s) adequately protect these assets. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rating 6 –Special Mention.  A Special Mention asset has potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date.  Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rating 7 –Substandard .   Loans with a well-defined weakness, some loss may be possible, though not anticipated.  A substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.  Assets so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected.  Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rating 8 –Doubtful.  Doubtful asset has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.   Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.   A substandard credit with 50 percent or more liquidated collateral value shortfall would generally be considered doubtful, unless other substantive credit factors justified otherwise. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Rating 9 –Loss.  Assets classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.  This classification does not mean the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.  Losses are taken in the period in which they determined to be uncollectible. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (in thousands)               |   |
|------------------------------|--------|
|                         |   | March 31, 2011 |   |
|                         |   |   |   |   | Special |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         |   | Pass |   |   | Mention |   |   | Substandard |   |   | Doubtful |   |   | Loss |   |   | Total |   |
| Construction and development |   | $ | 63,895 |   |   | $ | 13,890 |   |   | $ | 28,776 |   |   | $ | 4,584 |   |   | $ | - |   |   | $ | 111,145 |   |
| 1-4 family residential       |   |   | 101,682 |   |   |   | 1,846 |   |   |   | 13,184 |   |   |   | 3,683 |   |   |   | - |   |   |   | 120,395 |   |
| Multifamily                  |   |   | 5,883 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,883 |   |
| Farmland                     |   |   | 960 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 960 |   |
| Nonfarm, non residential     |   |   | 135,664 |   |   |   | 13,381 |   |   |   | 24,104 |   |   |   | 725 |   |   |   | - |   |   |   | 173,874 |   |
| Total real estate loans      |   |   | 308,084 |   |   |   | 29,117 |   |   |   | 66,064 |   |   |   | 8,992 |   |   |   | - |   |   |   | 412,257 |   |
| Commercial and industrial    |   |   | 48,040 |   |   |   | 6,573 |   |   |   | 4,916 |   |   |   | 3,199 |   |   |   | - |   |   |   | 62,728 |   |
| Consumer                     |   |   | 4,194 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4,194 |   |
| Total loans                  |   | $ | 360,318 |   |   | $ | 35,690 |   |   | $ | 70,980 |   |   | $ | 12,191 |   |   | $ | - |   |   | $ | 479,179 |   |

|                         |   |              |    |   |    |   |   |        |   |   |     |   |   |   |   |
|------------------------------|--------|-------------------|---------|--------|---------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|
|                         |   | December 31, 2010 |    |
|                         |   |              |    |   | Special |   |   |        |   |   |     |   |   |   |   |   |   |   |
|                         |   | Pass              |    |   | Mention |   |   | Substandard |   |   | Doubtful |   |   | Loss   |   |   | Total |   |
| Construction and development |   | $                 | 66,075  |   |    | $      | 9,033  |        |   | $      | 38,115   |   |   | $      | 1,309  |   |   | $ | - |   |   | $ | 114,532 |   |
| 1-4 family residential       |   |              | 101,321 |   |    |   | 1,491  |        |   |   | 14,517   |   |   |   | 2,888  |   |   |   | - |   |   |   | 120,217 |   |
| Multifamily                  |   |              | 6,417   |   |    |   | -      |        |   |   | -        |   |   |   | -      |   |   |   | - |   |   |   | 6,417 |   |
| Farmland                     |   |              | 965     |   |    |   | -      |        |   |   | -        |   |   |   | -      |   |   |   | - |   |   |   | 965 |   |
| Nonfarm, non residential     |   |              | 137,252 |   |    |   | 11,888 |        |   |   | 23,457   |   |   |   | 729    |   |   |   | - |   |   |   | 173,326 |   |
| Total real estate loans      |   |              | 312,030 |   |    |   | 22,412 |        |   |   | 76,089   |   |   |   | 4,926  |   |   |   | - |   |   |   | 415,457 |   |
| Commercial and industrial    |   |              | 53,243  |   |    |   | 6,215  |        |   |   | 3,178    |   |   |   | 3,618  |   |   |   | - |   |   |   | 66,254 |   |
| Consumer                     |   |              | 4,480   |   |    |   | -      |        |   |   | 4        |   |   |   | -      |   |   |   | - |   |   |   | 4,484 |   |
| Total loans                  |   | $                 | 369,753 |   |    | $      | 28,627 |        |   | $      | 79,271   |   |   | $      | 8,544  |   |   | $ | - |   |   | $ | 486,195 |   |

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|                         |   | March 31, 2011        |   |
|------------------------------|--------|-----------------------|--------|
|                         |   | Past Due and Accruing |   |   |   |   |   | Past Due and |   |   |   |   |   |   |   |
|                         |   | 30-59 days            |   |   | 60-89 days   | 90 or More Days |   |   | Nonaccrual |   |   | Nonaccrual |   |   | Current |   |   | Total Loans |   |
| Construction and development |   | $                     | 579    |   |   | $ | 68 |   |   | $ | - |   |   | $ | 14,526 |   |   | $ | 15,173 |   |   | $ | 95,972 |   |   | $ | 111,145 |   |
| 1-4 family residential       |   |                  | 1,616  |   |   |   | 44 |   |   |   | - |   |   |   | 13,588 |   |   |   | 15,248 |   |   |   | 105,147 |   |   |   | 120,395 |   |
| Multifamily                  |   |                  | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,883 |   |   |   | 5,883 |   |
| Farmland                     |   |                  | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 960 |   |   |   | 960 |   |
| Nonfarm, non residential     |   |                  | 587    |   |   |   | - |   |   |   | - |   |   |   | 8,911 |   |   |   | 9,498 |   |   |   | 164,376 |   |   |   | 173,874 |   |
| Total real estate loans      |   |                  | 2,782  |   |   |   | 112 |   |   |   | - |   |   |   | 37,025 |   |   |   | 39,919 |   |   |   | 372,338 |   |   |   | 412,257 |   |
| Commercial and industrial    |   |                  | 56     |   |   |   | 1 |   |   |   | - |   |   |   | 7,309 |   |   |   | 7,366 |   |   |   | 55,362 |   |   |   | 62,728 |   |
| Consumer                     |   |                  | 3      |   |   |   | - |   |   |   | - |   |   |   | 37 |   |   |   | 40 |   |   |   | 4,154 |   |   |   | 4,194 |   |
| Total loans                  |   | $                     | 2,841  |   |   | $ | 113 |   |   | $ | - |   |   | $ | 44,371 |   |   | $ | 47,325 |   |   | $ | 431,854 |   |   | $ | 479,179 |   |

|                         |   |                        |   |   |             |                  |   |         |       |   |   |       |   |   |    |   |   |        |   |   |   |
|------------------------------|--------|-----------------------------|--------|--------|------------------|-----------------------|--------|--------------|------------|--------|--------|------------|--------|--------|---------|--------|--------|-------------|--------|--------|--------|
|                         |   | December 31, 2010           |   |
|                         |   | Past Due and Accruing  |   |   |             |                  |   | Past Due and |       |   |   |       |   |   |    |
|                         |   | 30-59 days                  |   |   | 60-89 days  |  90 or More Days |   |         | Nonaccrual |   |   | Nonaccrual |   |   | Current |   |   | Total Loans |   |
| Construction and development |   | $                           | 186    |   |             | $                     | -      |         |       | $      | -      |       |   | $      | 12,487  |   |   | $           | 12,673 |   |   | $ | 101,859 |   |   | $ | 114,532 |   |
| 1-4 family residential       |   |                        | 2,021  |   |             |                  | 608    |         |       |   | 5      |       |   |   | 11,042  |   |   |        | 13,676 |   |   |   | 106,541 |   |   |   | 120,217 |   |
| Multifamily                  |   |                        | -      |   |             |                  | -      |         |       |   | -      |       |   |   | -       |   |   |        | -      |   |   |   | 6,417 |   |   |   | 6,417 |   |
| Farmland                     |   |                        | -      |   |             |                  | -      |         |       |   | -      |       |   |   | -       |   |   |        | -      |   |   |   | 965 |   |   |   | 965 |   |
| Nonfarm, non residential     |   |                        | 1,467  |   |             |                  | 532    |         |       |   | -      |       |   |   | 8,285   |   |   |        | 10,284 |   |   |   | 163,042 |   |   |   | 173,326 |   |
| Total real estate loans      |   |                        | 3,674  |   |             |                  | 1,140  |         |       |   | 5      |       |   |   | 31,814  |   |   |        | 36,633 |   |   |   | 378,824 |   |   |   | 415,457 |   |
| Commercial and industrial    |   |                        | 640    |   |             |                  | 1,747  |         |       |   | -      |       |   |   | 5,966   |   |   |        | 8,353  |   |   |   | 57,901 |   |   |   | 66,254 |   |
| Consumer                     |   |                        | 31     |   |             |                  | 15     |         |       |   | -      |       |   |   | 19      |   |   |        | 65     |   |   |   | 4,419 |   |   |   | 4,484 |   |
| Total loans                  |   | $                           | 4,345  |   |             | $                     | 2,902  |         |       | $      | 5      |       |   | $      | 37,799  |   |   | $           | 45,051 |   |   | $ | 441,144 |   |   | $ | 486,195 |   |

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| Allowance For Loan Losses and Recorded Investment in Loans Receivable         |   |                                |    |   |                  |   |    |        |   |   |     |   |   |                    |   |
|-------------------------------------------------------------------------------|--------|-------------------------------------|---------|--------|-----------------------|--------|---------|-------------|--------|--------|----------|--------|--------|-------------------------|--------|
| (in thousands)                                                                |   |                                |    |
|                                                                          |   | March 31, 2011                      |    |
|                                                                          |   | Construction & Land Development |    |   | 1-4 FamilyResidential |   |    | Multifamily |   |   | Farmland |   |   | Nonfarm, Nonresidential |   |   | Commercial&Industrial |   |   | Consumer |   |   | Unallocated |   |   | Total |   |
| Allowance For Loan Losses                                                     |   |                                |    |   |                  |   |    |        |   |   |     |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                                                             |   | $                                   | 8,499   |   |                  | $      | 4,371   |        |   | $      | 35       |   |   | $                       | 12     |   |   | $ | 1,798 |   |   | $ | 1,412 |   |   | $ | 64 |   |   | $ | - |   |   | $ | 16,191 |   |
| Provision for loan losses                                                     |   |                                | (645    | )      |                  |   | (72     | )           |   |   | (3       | )      |   |                    | 1      |   |   |   | (73 | ) |   |   | 1,466 |   |   |   | 12 |   |   |   | - |   |   |   | 686 |   |
| Charge-offs                                                                   |   |                                | (2,096  | )      |                  |   | (297    | )           |   |   | -        |   |   |                    | -      |   |   |   | (32 | ) |   |   | (573 | ) |   |   | (17 | ) |   |   | - |   |   |   | (3,015 | ) |
| Recoveries                                                                    |   |                                | -       |   |                  |   | 3       |        |   |   | -        |   |   |                    | -      |   |   |   | - |   |   |   | 36 |   |   |   | 4 |   |   |   | - |   |   |   | 43 |   |
| Ending balance                                                                |   | $                                   | 5,758   |   |                  | $      | 4,005   |        |   | $      | 32       |   |   | $                       | 13     |   |   | $ | 1,693 |   |   | $ | 2,341 |   |   | $ | 63 |   |   | $ | - |   |   | $ | 13,905 |   |
| Ending allowance balance for loans individually evaluated for impairment |   | $                                   | 3,812   |   |                  | $      | 3,200   |        |   | $      | -        |   |   | $                       | -      |   |   | $ | 1,149 |   |   | $ | 1,524 |   |   | $ | - |   |   | $ | - |   |   | $ | 9,685 |   |
| Ending allowance balance for loans collectively evaluated for impairment      |   | $                                   | 1,946   |   |                  | $      | 805     |        |   | $      | 32       |   |   | $                       | 13     |   |   | $ | 545 |   |   | $ | 817 |   |   | $ | 63 |   |   | $ | - |   |   | $ | 4,221 |   |
| Loans Receivable                                                              |   |                                |    |   |                  |   |    |        |   |   |     |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total period-end balance                                                      |   | $                                   | 111,145 |   |                  | $      | 120,395 |        |   | $      | 5,883    |   |   | $                       | 960    |   |   | $ | 173,874 |   |   | $ | 62,728 |   |   | $ | 4,194 |   |   | $ | - |   |   | $ | 479,179 |   |
| Balance of loans individually evaluated for impairment                        |   | $                                   | 33,635  |   |                  | $      | 17,599  |        |   | $      | -        |   |   | $                       | -      |   |   | $ | 24,818 |   |   | $ | 7,819 |   |   | $ | 2 |   |   | $ | - |   |   | $ | 83,873 |   |
| Balance of loans collectively evaluated for impairment                        |   | $                                   | 77,510  |   |                  | $      | 102,796 |        |   | $      | 5,883    |   |   | $                       | 960    |   |   | $ | 149,056 |   |   | $ | 54,909 |   |   | $ | 4,192 |   |   | $ | - |   |   | $ | 395,306 |   |

|                                                                          |   |
|-------------------------------------------------------------------------------|--------|
|                                                                          |   | December 31, 2010 |   |
|                                                                          |   | Construction & Land Development |   |   | 1-4 FamilyResidential |   |   | Multifamily |   |   | Farmland |   |   | Nonfarm, Nonresidential |   |   | Commercial & Industrial |   |   | Consumer |   |   | Unallocated |   |   | Total |   |
| Allowance For Loan Losses                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                                                             |   | $ | 15,454 |   |   | $ | 5,010 |   |   | $ | 27 |   |   | $ | - |   |   | $ | 3,232 |   |   | $ | 3,964 |   |   | $ | 183 |   |   | $ | 361 |   |   | $ | 28,231 |   |
| Provision for loan losses                                                     |   |   | 8,642 |   |   |   | 2,370 |   |   |   | 192 |   |   |   | 12 |   |   |   | (626 | ) |   |   | 1,905 |   |   |   | 328 |   |   |   | (361 | ) |   |   | 12,462 |   |
| Charge-offs                                                                   |   |   | (16,008 | ) |   |   | (3,043 | ) |   |   | (184 | ) |   |   | - |   |   |   | (812 | ) |   |   | (4,706 | ) |   |   | (475 | ) |   |   | - |   |   |   | (25,228 | ) |
| Recoveries                                                                    |   |   | 411 |   |   |   | 34 |   |   |   | - |   |   |   | - |   |   |   | 4 |   |   |   | 249 |   |   |   | 28 |   |   |   | - |   |   |   | 726 |   |
| Ending balance                                                                |   | $ | 8,499 |   |   | $ | 4,371 |   |   | $ | 35 |   |   | $ | 12 |   |   | $ | 1,798 |   |   | $ | 1,412 |   |   | $ | 64 |   |   | $ | - |   |   |   | 16,191 |   |
| Ending allowance balance for loans individually evaluated for impairment |   | $ | 5,674 |   |   | $ | 3,496 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,206 |   |   | $ | 371 |   |   | $ | - |   |   | $ | - |   |   | $ | 10,747 |   |
| Ending allowance balance for loans collectively evaluated for impairment      |   | $ | 2,825 |   |   | $ | 875 |   |   | $ | 35 |   |   | $ | 12 |   |   | $ | 592 |   |   | $ | 1,041 |   |   | $ | 64 |   |   | $ | - |   |   | $ | 5,444 |   |
| Loans Receivable                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total period-end balance                                                      |   | $ | 114,532 |   |   | $ | 120,217 |   |   | $ | 6,417 |   |   | $ | 965 |   |   | $ | 173,326 |   |   | $ | 66,254 |   |   | $ | 4,484 |   |   | $ | - |   |   | $ | 486,195 |   |
| Balance of loans individually evaluated for impairment                        |   | $ | 39,844 |   |   | $ | 18,383 |   |   | $ | - |   |   | $ | - |   |   | $ | 23,989 |   |   | $ | 6,493 |   |   | $ | 4 |   |   | $ | - |   |   | $ | 88,713 |   |
| Balance of loans collectively evaluated for impairment                   |   | $ | 74,688 |   |   | $ | 101,834 |   |   | $ | 6,417 |   |   | $ | 965 |   |   | $ | 149,337 |   |   | $ | 59,761 |   |   | $ | 4,480 |   |   | $ | - |   |   | $ | 397,482 |   |

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| (in thousands)                     |   |             |   |   |        |   |   |            |   |   |           |   |   |     |   |
|------------------------------------|--------|------------------|--------|--------|-------------|--------|--------|-----------------|--------|--------|----------------|--------|--------|----------|--------|
|                               |   | March 31, 2011   |   |
|                               |   | Construction and |   |   | 1-4 Family  |   |   | Nonfarm         |   |   | Commercial     |   |   |     |   |   |   |   |
|                               |   | Development      |   |   | Residential |   |   | Non residential |   |   | and Industrial |   |   | Consumer |   |   | Total |   |
| With no related allowance recorded |   |             |   |   |        |   |   |            |   |   |           |   |   |     |   |   |   |   |
| Recorded investment                |   | $                | 16,239 |   |        | $      | 5,632  |            |   | $      | 17,879         |   |   | $        | 2,892  |   |   | $ | 2 |   |   | $ | 42,644 |   |
| Unpaid principal balance           |   |             | 18,105 |   |        |   | 5,685  |            |   |   | 18,208         |   |   |     | 4,108  |   |   |   | 2 |   |   |   | 46,108 |   |
| Related allowance                  |   |             | -      |   |        |   | -      |            |   |   | -              |   |   |     | -      |   |   |   | - |   |   |   | - |   |
| Average recorded investment        |   |             | 17,269 |   |        |   | 5,643  |            |   |   | 17,184         |   |   |     | 2,913  |   |   |   | 2 |   |   |   | 43,011 |   |
| Interest income recognized         |   |             | 197    |   |        |   | 58     |            |   |   | 202            |   |   |     | 2      |   |   |   | - |   |   |   | 459 |   |
| With an allowance recorded         |   |             |   |   |        |   |   |            |   |   |           |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Recorded investment                |   | $                | 17,396 |   |        | $      | 11,967 |            |   | $      | 6,939          |   |   | $        | 4,927  |   |   | $ | - |   |   | $ | 41,229 |   |
| Unpaid principal balance           |   |             | 18,706 |   |        |   | 13,619 |            |   |   | 7,034          |   |   |     | 5,445  |   |   |   | - |   |   |   | 44,804 |   |
| Related allowance                  |   |             | 3,812  |   |        |   | 3,200  |            |   |   | 1,149          |   |   |     | 1,524  |   |   |   | - |   |   |   | 9,685 |   |
| Average recorded investment        |   |             | 17,732 |   |        |   | 11,992 |            |   |   | 6,651          |   |   |     | 5,003  |   |   |   | - |   |   |   | 41,378 |   |
| Interest income recognized         |   |             | 125    |   |        |   | 89     |            |   |   | 55             |   |   |     | 7      |   |   |   | - |   |   |   | 276 |   |
| Total                              |   |             |   |   |        |   |   |            |   |   |           |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Recorded investment                |   | $                | 33,635 |   |        | $      | 17,599 |            |   | $      | 24,818         |   |   | $        | 7,819  |   |   | $ | 2 |   |   | $ | 83,873 |   |
| Unpaid principal balance           |   |             | 36,811 |   |        |   | 19,304 |            |   |   | 25,242         |   |   |     | 9,553  |   |   |   | 2 |   |   |   | 90,912 |   |
| Related allowance                  |   |             | 3,812  |   |        |   | 3,200  |            |   |   | 1,149          |   |   |     | 1,524  |   |   |   | - |   |   |   | 9,685 |   |
| Average recorded investment        |   |             | 35,001 |   |        |   | 17,635 |            |   |   | 23,835         |   |   |     | 7,916  |   |   |   | 2 |   |   |   | 84,389 |   |
| Interest income recognized         |   |             | 322    |   |        |   | 147    |            |   |   | 257            |   |   |     | 9      |   |   |   | - |   |   |   | 735 |   |

|                               |   |              |   |   |        |   |   |            |   |   |           |   |   |     |   |
|------------------------------------|--------|-------------------|--------|--------|-------------|--------|--------|-----------------|--------|--------|----------------|--------|--------|----------|--------|
|                               |   | December 31, 2010 |   |
|                               |   | Construction and  |   |   | 1-4 Family  |   |   | Nonfarm         |   |   | Commercial     |   |   |     |   |   |   |   |
|                               |   | Development       |   |   | Residential |   |   | Non residential |   |   | and Industrial |   |   | Consumer |   |   | Total |   |
| With no related allowance recorded |   |              |   |   |        |   |   |            |   |   |           |   |   |     |   |   |   |   |
| Recorded investment                |   | $                 | 16,972 |   |        | $      | 5,455  |            |   | $      | 17,047         |   |   | $        | 4,896  |   |   | $ | 4 |   |   | $ | 44,374 |   |
| Unpaid principal balance           |   |              | 17,149 |   |        |   | 5,481  |            |   |   | 17,349         |   |   |     | 7,733  |   |   |   | 4 |   |   |   | 47,716 |   |
| Related allowance                  |   |              | -      |   |        |   | -      |            |   |   | -              |   |   |     | -      |   |   |   | - |   |   |   | - |   |
| Average recorded investment        |   |              | 17,502 |   |        |   | 5,441  |            |   |   | 17,215         |   |   |     | 6,491  |   |   |   | 5 |   |   |   | 46,654 |   |
| Interest income recognized         |   |              | 974    |   |        |   | 266    |            |   |   | 892            |   |   |     | 166    |   |   |   | 1 |   |   |   | 2,299 |   |
| With an allowance recorded         |   |              |   |   |        |   |   |            |   |   |           |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Recorded investment                |   | $                 | 22,872 |   |        | $      | 12,928 |            |   | $      | 6,942          |   |   | $        | 1,597  |   |   | $ | - |   |   | $ | 44,339 |   |
| Unpaid principal balance           |   |              | 24,172 |   |        |   | 14,905 |            |   |   | 7,097          |   |   |     | 1,627  |   |   |   | - |   |   |   | 47,801 |   |
| Related allowance                  |   |              | 5,674  |   |        |   | 3,496  |            |   |   | 1,206          |   |   |     | 371    |   |   |   | - |   |   |   | 10,747 |   |
| Average recorded investment        |   |              | 21,533 |   |        |   | 13,925 |            |   |   | 6,956          |   |   |     | 1,814  |   |   |   | - |   |   |   | 44,228 |   |
| Interest income recognized         |   |              | 886    |   |        |   | 395    |            |   |   | 316            |   |   |     | 66     |   |   |   | - |   |   |   | 1,663 |   |
| Total                              |   |              |   |   |        |   |   |            |   |   |           |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Recorded investment                |   | $                 | 39,844 |   |        | $      | 18,383 |            |   | $      | 23,989         |   |   | $        | 6,493  |   |   | $ | 4 |   |   | $ | 88,713 |   |
| Unpaid principal balance           |   |              | 41,321 |   |        |   | 20,386 |            |   |   | 24,446         |   |   |     | 9,360  |   |   |   | 4 |   |   |   | 95,517 |   |
| Related allowance                  |   |              | 5,674  |   |        |   | 3,496  |            |   |   | 1,206          |   |   |     | 371    |   |   |   | - |   |   |   | 10,747 |   |
| Average recorded investment        |   |              | 39,035 |   |        |   | 19,366 |            |   |   | 24,171         |   |   |     | 8,305  |   |   |   | 5 |   |   |   | 90,882 |   |
| Interest income recognized         |   |              | 1,860  |   |        |   | 661    |            |   |   | 1,208          |   |   |     | 232    |   |   |   | 1 |   |   |   | 3,962 |   |

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| (dollars in thousands)                                    |   |      |   |   |         |   |
|-----------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                                      |   | March 31, |   |   | December 31, |   |
|                                                      |   | 2011      |   |   | 2010         |   |
| Nonaccrual loans                                          |   | $         | 44,371 |   |         | $      | 37,799 |   |
| Loan past due 90 or more days and still accruing interest |   |      | -      |   |         |   | 5 |   |
| Total nonperforming loans                                 |   |      | 44,371 |   |         |   | 37,804 |   |
| Foreclosed real estate                                    |   |      | 5,942  |   |         |   | 7,314 |   |
| Repossessed assets                                        |   |      | 7      |   |         |   | 7 |   |
| Total nonperforming assets                                |   | $         | 50,320 |   |         | $      | 45,125 |   |
|                                                      |   |      |   |   |         |   |   |   |
|                                                      |   |      |   |   |         |   |   |   |
| Allowance for loan losses                                 |   | $         | 13,905 |   |         | $      | 16,191 |   |
| Nonperforming loans to period-end loans,                  |   |      |   |   |         |   |   |   |
| excluding loans held for sale                             |   |      | 9.26   | %      |         |   | 7.78 | % |
| Allowance for loan losses to period-end loans,            |   |      |   |   |         |   |   |   |
| excluding loans held for sale                             |   |      | 2.90   | %      |         |   | 3.33 | % |
| Nonperforming assets as a percentage of:                  |   |      |   |   |         |   |   |   |
| Loans and foreclosed real estate                          |   |      | 10.37  | %      |         |   | 9.14 | % |
| Total assets                                              |   |      | 6.89   | %      |         |   | 6.23 | % |
| Ratio of allowance for loan losses to nonperforming loans |   |      | 31.3   | %      |         |   | 42.8 | % |

| (in thousands)               |   |   |   |
|------------------------------|--------|--------|--------|
|                         |   |   |   |   |
| Balance at beginning of year |   | $      | 7,314  |   |
| Additions                    |   |   | 231    |   |
| Sales                        |   |   | (1,603 | ) |
| Write-downs                  |   |   | -      |   |
| Balance at end of period     |   | $      | 5,942  |   |

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| (in thousands) |        |   |    |
|----------------|-------------|--------|---------|
|           | Maturing in |   |    | Amount |   |
| 2011           |        | $      | 165,239 |   |
| 2012           |        |   | 186,159 |   |
| 2013           |        |   | 18,960  |   |
| 2014           |        |   | 2,484   |   |
| 2015           |        |   | 462     |   |
| 2015           |        |   | 200     |   |
|           |        | $      | 373,504 |   |

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| (dollars in thousands)                         |   |              |   |   |                 |   |
|------------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|
|                                           |   | At March 31, 2011 |   |   | At December 31, 2010 |   |
|                                           |   |              |   |   | Weighted             |   |   |   |   |   | Weighted |   |
|                                           |   |              |   |   | Average              |   |   |   |   |   | Average |   |
|                                           |   | Amount            |   |   | Rate                 |   |   | Amount |   |   | Rate |   |
| Advances from the Federal Home Loan Bank       |   | $                 | 3,952  |   |                 |   | 0.44 | % |   | $ | 3,952 |   |   |   | 0.43 | % |
| Securities sold under agreements to repurchase |   |              | 868    |   |                 |   | 0.75 | % |   |   | 704 |   |   |   | 0.88 | % |
| Other secured borrowing                        |   |              | -      |   |                 |   | - | % |   |   | 3,619 |   |   |   | - | % |
| Total                                          |   | $                 | 4,820  |   |                 |   | 0.50 | % |   | $ | 8,275 |   |   |   | 0.43 | % |

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| (dollars in thousands)                                                      |   |                        |    |
|-----------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                        |   | Three Months Ended March 31 |    |
|                                                                        |   | 2011                        |    |   | 2010 |   |
| Balance at beginning of the period                                          |   | $                           | 16,191  |   |   | $ | 28,231 |   |
| Provision for loan losses                                                   |   |                        | 686     |   |   |   | 300 |   |
| Charge-offs                                                                 |   |                        |    |   |   |   |   |   |
| Construction and development                                                |   |                        | 2,096   |   |   |   | 990 |   |
| 1-4 family residential                                                      |   |                        | 297     |   |   |   | 1,339 |   |
| Multifamily                                                                 |   |                        | -       |   |   |   | 184 |   |
| Nonfarm, non residential                                                    |   |                        | 32      |   |   |   | 216 |   |
| Total real estate                                                           |   |                        | 2,425   |   |   |   | 2,729 |   |
| Commercial                                                                  |   |                        | 573     |   |   |   | 282 |   |
| Consumer                                                                    |   |                        | 17      |   |   |   | 175 |   |
| Total charge-offs                                                           |   |                        | 3,015   |   |   |   | 3,186 |   |
| Recoveries                                                                  |   |                        |    |   |   |   |   |   |
| Construction and development                                                |   |                        | -       |   |   |   | 327 |   |
| 1-4 family residential                                                      |   |                        | 3       |   |   |   | 3 |   |
| Nonfarm, non residential                                                    |   |                        | -       |   |   |   | - |   |
| Total real estate                                                           |   |                        | 3       |   |   |   | 330 |   |
| Commercial                                                                  |   |                        | 36      |   |   |   | 13 |   |
| Consumer                                                                    |   |                        | 4       |   |   |   | 3 |   |
| Total recoveries                                                            |   |                        | 43      |   |   |   | 346 |   |
| Net charge-offs                                                             |   |                        | 2,972   |   |   |   | 2,840 |   |
| Balance at end of period                                                    |   | $                           | 13,905  |   |   | $ | 25,691 |   |
| Average loans, excluding loans held for sale                                |   | $                           | 481,768 |   |   | $ | 548,946 |   |
| Period end loans, excluding loans held for sale                             |   | $                           | 479,179 |   |   | $ | 539,318 |   |
| Net charge-offs to average loans,excluding loans held for sale (1)          |   |                        | 2.47    | % |   |   | 2.07 | % |
| Allowance for loan losses to period end loans,excluding loans held for sale |   |                        | 2.90    | % |   |   | 4.76 | % |

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|  (in thousands)         |   |      |   |   |         |   |
|------------------------------|--------|-----------|--------|--------|--------------|--------|
|                         |   | March 31, |   |   | December 31, |   |
|                         |   | 2011      |   |   | 2010         |   |
| Commitments to extend credit |   | $         | 51,106 |   |         | $      | 57,061 |   |
| Standby letters of credit    |   |      | 563    |   |         |   | 1,328 |   |
| Total                        |   | $         | 51,669 |   |         | $      | 58,389 |   |

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|               |   | Outstanding Options |    |     | Exercisable Options |   |
|--------------------|--------|---------------------|---------|----------|---------------------|--------|
|               |   |                |    | Weighted |                |   |   |   | Weighted |   |
|               |   |                |    | Average  |                |   |   |   | Average |   |
|               |   | Number              |    | Exercise |                |   | Number |   | Exercise |   |
|               |   | Outstanding         |    |     | Price               |   |   | Outstanding |   |   | Price |   |
| At January 1, 2011 |   |                | 786,043 |     |                | $      | 8.42 |   |   |   | 780,043 |   |   | $ | 8.37 |   |
| Options granted    |   |                | -       |     |                |   |   |   |   |   | - |   |   |   | - |   |
| Options vested     |   |                | -       |     |                |   |   |   |   |   | - |   |   |   | - |   |
| Options forfeited  |   |                | (23,436 | )        |                |   | 13.31 |   |   |   | (23,436 | ) |   |   | 13.31 |   |
| At March 31, 2011  |   |                | 762,607 |     |                | $      | 8.27 |   |   |   | 756,607 |   |   | $ | 8.26 |   |

| (dollars in thousands) |   |   |        |    |   |        |   |    |      |   |   |             |   |
|------------------------|--------|--------|-------------|---------|--------|-------------|--------|---------|-----------|--------|--------|------------------|--------|
|                   |   |   |        |    |   |        |   |    |      |   |   | Weighted Average |   |
|                   |   |   |        |    |   |        |   |    | Average   |   |   | Remaining        |   |
|                   |   |   | Number      |    |   | Number      |   |    | Intrinsic |   |   | Contractual Life |   |
| Exercise Price         |   |   | Outstanding |    |   | Exercisable |   |    | Value     |   |   | (in Years)       |   |
| $5.63                  |   |   |        | 502,820 |   |        |   | 502,820 |      |   | $      | -                |   |   |   | 3.24 |   |
| $9.90                  |   |   |        | 10,000  |   |        |   | 4,000   |      |   |   | -                |   |   |   | 7.24 |   |
| $13.31                 |   |   |        | 231,481 |   |        |   | 231,481 |      |   |   | -                |   |   |   | 4.50 |   |
| $14.08                 |   |   |        | 12,056  |   |        |   | 12,056  |      |   |   | -                |   |   |   | 4.24 |   |
| $20.60                 |   |   |        | 6,250   |   |        |   | 6,250   |      |   |   | -                |   |   |   | 4.67 |   |
| Total                  |   |   |        | 762,607 |   |        |   | 756,607 |      |   | $      | -                |   |   |   | 3.70 |   |

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| (dollars in thousands)         |   |   |    |       |   |
|--------------------------------|--------|--------|---------|------------|--------|
|                           |   |   |    | Weighted   |   |
|                           |   |   |    | Average    |   |
|                           |   |   |    | Grant Date |   |
|                           |   | Shares |    | Fair Value |   |
| Outstanding at January 1, 2011 |   |   | 58,165  |       |   | $ | 2.60 |   |
| Granted                        |   |   | -       |       |   |   | - |   |
| Vested                         |   |   | (2,000  | )          |   |   | 5.52 |   |
| Forfeited                      |   |   | (15,000 | )          |   |   | 2.15 |   |
| Outstanding at March 31, 2011  |   |   | 41,165  |       |   | $ | 2.63 |   |

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| Level 1 | Valuation can be based on quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                                    |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 2 | Valuation can be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active/or models using inputs that are observable or can be corroborated by observable market data of substantially the full term or the assets or liabilities.  |
| Level 3 | Valuation can be based on using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.       |

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| (in thousands)                   |   |                                        |
|----------------------------------|--------|---------------------------------------------|
|                             |   |  March 31, 2011                        |
|                             |   |  Quoted Market Price in Active Markets |   |   |  Significant Other Observable Inputs |   |   |  Significant Unoberservable Inputs |   |
|                             |   | (Level 1)                                   |   |   | (Level 2) |   |   | (Level 3) |   |
|                             |   |                                        |   |   |   |   |   |   |   |
| Available-for-sale securities:   |   |                                        |   |   |   |   |   |   |   |
| U.S. government agencies         |   | $                                           | - |   |   | $ | 7,227 |   |   | $ | - |   |
| Government-sponsored enterprises |   |                                        | - |   |   |   | 37,347 |   |   |   | - |   |
| Mortgage-backed securities       |   |                                        | - |   |   |   | 90,426 |   |   |   | - |   |
| Total                            |   | $                                           | - |   |   | $ | 135,000 |   |   | $ | - |   |

|                             |   |   December 31, 2010               |
|----------------------------------|--------|---------------------------------------------|
|                             |   |  Quoted Market Price in Active Markets |   |   |  Significant Other Observable Inputs |   |   | Significant UnoberservableInputs |   |
|                             |   | (Level 1)                                   |   |   | (Level 2) |   |   | (Level 3) |   |
|                             |   |                                        |   |   |   |   |   |   |   |
| Available-for-sale securities:   |   |                                        |   |   |   |   |   |   |   |
| U.S. government agencies         |   | $                                           | - |   |   | $ | 5,323 |   |   | $ | - |   |
| Government-sponsored enterprises |   |                                        | - |   |   |   | 44,039 |   |   |   | - |   |
| Mortgage-backed securities       |   |                                        | - |   |   |   | 81,052 |   |   |   | - |   |
| Total                            |   | $                                           | - |   |   | $ | 130,414 |   |   | $ | - |   |

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| (in thousands)                   |   |                                  |   |
|----------------------------------|--------|---------------------------------------|--------|
|                             |   |  March 31, 2011                  |   |
|                             |   | Quoted Market Price in Active Markets |   |   | Significant Other Observable Inputs |   | Significant UnoberservableInputs |   |
|                             |   | (Level 1)                             |   |   | (Level 2) |   |   | (Level 3) |   |
|                             |   |                                  |   |   |   |   |   |   |   |
| Impaired loans:                  |   |                                  |   |   |   |   |   |   |   |
| Construction and development     |   | $                                     | -      |   |   | $ | 29,823 |   |   | $ | - |   |
| 1-4 family residential           |   |                                  | -      |   |   |   | 14,399 |   |   |   | - |   |
| Nonfarm, non residential         |   |                                  | -      |   |   |   | 23,669 |   |   |   | - |   |
| Total impaired real estate loans |   |                                  |   |   |   |   | 67,891 |   |   |   |   |   |
| Commercial and industrial        |   |                                  | -      |   |   |   | 6,295 |   |   |   | - |   |
| Consumer                         |   |                                  | -      |   |   |   | 2 |   |   |   | - |   |
| Total impaired loans             |   |                                  | -      |   |   |   | 74,188 |   |   |   | - |   |
| Mortgage loans held for sale     |   |                                  | -      |   |   |   | 3,396 |   |   |   | - |   |
| Foreclosed real estate           |   |                                  | -      |   |   |   | 5,942 |   |   |   |   |   |
| Total                            |   | $                                     | -      |   |   | $ | 83,526 |   |   | $ | - |   |

|                             |   |   December 31, 2010         |
|----------------------------------|--------|---------------------------------------|
|                             |   | Quoted Market Price in Active Markets |   |   | Significant Other Observable Inputs |   | Significant UnoberservableInputs |   |
|                             |   | (Level 1)                             |   |   | (Level 2) |   |   | (Level 3) |   |
|                             |   |                                  |   |   |   |   |   |   |   |
| Impaired loans:                  |   |                                  |   |   |   |   |   |   |   |
| Construction and development     |   | $                                     | - |   |   | $ | 32,995 |   |   | $ | - |   |
| 1-4 family residential           |   |                                  | - |   |   |   | 14,887 |   |   |   | - |   |
| Nonfarm, non residential         |   |                                  | - |   |   |   | 22,783 |   |   |   | - |   |
| Total impaired real estate loans |   |                                  |   |   |   |   | 70,665 |   |   |   |   |   |
| Commercial and industrial        |   |                                  | - |   |   |   | 5,897 |   |   |   | - |   |
| Consumer                         |   |                                  | - |   |   |   | 4 |   |   |   | - |   |
| Total impaired loans             |   |                                  | - |   |   |   | 76,566 |   |   |   | - |   |
| Mortgage loans held for sale     |   |                                  | - |   |   |   | 11,026 |   |   |   | - |   |
| Foreclosed real estate           |   |                                  | - |   |   |   | 7,314 |   |   |   |   |   |
| Total                            |   | $                                     | - |   |   | $ | 94,906 |   |   | $ | - |   |

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| (in thousands)                           |   |            |    |   |                 |   |
|------------------------------------------|--------|-----------------|---------|--------|----------------------|--------|
|                                     |   | March 31, 2011  |    |   | December 31, 2010    |   |
|                                     |   | Carrying Amount |    |   | Estimated Fair Value |   |   | Carrying Amount |   |   | Estimated Fair Value |   |
| Financial Assets:                        |   |            |    |   |                 |   |   |   |   |   |   |   |
| Cash and cash equivalents                |   | $               | 73,727  |   |                 | $      | 73,727 |   |   | $ | 57,398 |   |   | $ | 57,398 |   |
| Investment securities available for sale |   |            | 135,000 |   |                 |   | 135,000 |   |   |   | 130,414 |   |   |   | 131,919 |   |
| Investment securities held to maturity   |   |            | 3,964   |   |                 |   | 3,941 |   |   |   | 2,765 |   |   |   | 2,742 |   |
| Restricted equity securites              |   |            | 5,516   |   |                 |   | 5,516 |   |   |   | 5,516 |   |   |   | 5,516 |   |
| Investment in real estate partnership    |   |            | 6,356   |   |                 |   | 6,356 |   |   |   | 6,356 |   |   |   | 6,356 |   |
| Loans held for sale                      |   |            | 3,396   |   |                 |   | 3,396 |   |   |   | 11,026 |   |   |   | 11,026 |   |
| Loans                                    |   |            | 479,179 |   |                 |   | 474,817 |   |   |   | 486,195 |   |   |   | 483,187 |   |
| Bank-owned life insurance                |   |            | 12,625  |   |                 |   | 12,625 |   |   |   | 12,517 |   |   |   | 12,517 |   |
| Financial Liabilities:                   |   |            |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                 |   |            | 673,547 |   |                 |   | 667,054 |   |   |   | 674,337 |   |   |   | 669,408 |   |
| Federal funds purchased and securities   |   |            |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| sold under agreements to repurchase      |   |            | 868     |   |                 |   | 868 |   |   |   | 704 |   |   |   | 704 |   |
| Borrowings                               |   |            | 3,952   |   |                 |   | 3,913 |   |   |   | 7,571 |   |   |   | 7,499 |   |

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| (dollars in thousands)    |   |   |   |   |                               |   |   |                                                             |   |
|------------------------------------------|--------|--------|--------|--------|------------------------------------|--------|--------|------------------------------------------------------------------|--------|
|                                     |   | Actual |   |   | For Capital Adequacy Purposes |   |   | To be "Well Capitalized"Under Prompt CorrectiveAction Provisions |   |
|                                     |   | Amount |   |   | Ratio                              |   |   | Amount                                                           |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| As of March 31, 2011                     |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to Risk-weighted Assets)  |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |
| Company                                  |   | $      | 39,144 |   |                               |   | 8.43   | %                                                                |   | $ | 37,150 |   |   |   | 8.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                                     |   |   | 39,072 |   |                               |   | 8.41   | %                                                           |   |   | 37,149 |   |   |   | 8.00 | %  |   | $ | 46,436 |   |   |   | 10.00 | %  |
| Tier I Capital (to Risk-weighted Assets) |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                  |   | $      | 33,239 |   |                               |   | 7.16   | %                                                                |   | $ | 18,575 |   |   |   | 4.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                                     |   |   | 33,167 |   |                               |   | 7.14   | %                                                           |   |   | 18,575 |   |   |   | 4.00 | %  |   | $ | 27,862 |   |   |   | 6.00 | %  |
| Tier I Capital (to Average Assets)       |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                  |   | $      | 33,239 |   |                               |   | 4.68   | %                                                                |   | $ | 28,414 |   |   |   | 4.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                                     |   |   | 33,167 |   |                               |   | 4.67   | %                                                           |   |   | 28,411 |   |   |   | 4.00 | %  |   | $ | 35,514 |   |   |   | 5.00 | %  |
| As of December 31, 2010                  |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to Risk-weighted Assets)  |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                  |   | $      | 38,410 |   |                               |   | 8.04   | %                                                                |   | $ | 38,242 |   |   |   | 8.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                                     |   |   | 38,397 |   |                               |   | 8.03   | %                                                           |   |   | 38,237 |   |   |   | 8.00 | %  |   | $ | 47,796 |   |   |   | 10.00 | %  |
| Tier I Capital (to Risk-weighted Assets) |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                  |   | $      | 32,308 |   |                               |   | 6.76   | %                                                                |   | $ | 19,121 |   |   |   | 4.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                                     |   |   | 32,297 |   |                               |   | 6.76   | %                                                           |   |   | 19,119 |   |   |   | 4.00 | %  |   | $ | 28,679 |   |   |   | 6.00 | %  |
| Tier I Capital (to Average Assets)       |   |   |   |   |                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Company                                  |   | $      | 32,308 |   |                               |   | 4.30   | %                                                                |   | $ | 30,060 |   |   |   | 4.00 | % |   |   | n/a |   |   |   | n/a |   |
| Bank                                     |   |   | 32,297 |   |                               |   | 4.30   | %                                                           |   |   | 30,057 |   |   |   | 4.00 | %  |   | $ | 37,571 |   |   |   | 5.00 | %  |

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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| (in thousands)                  |   |      |    |   |         |   |
|---------------------------------|--------|-----------|---------|--------|--------------|--------|
|                            |   | March 31, |    |   | December 31, |   |
|                            |   | 2011      |    |   | 2010         |   |
| Real estate:                    |   |      |    |   |         |   |
| Construction and development    |   | $         | 111,145 |   |         | $      | 114,532 |   |
| 1-4 family residential          |   |      | 120,395 |   |         |   | 120,217 |   |
| Mutlifamily                     |   |      | 5,883   |   |         |   | 6,417 |   |
| Farmland                        |   |      | 960     |   |         |   | 965 |   |
| Nonfarm, nonresidential         |   |      | 173,874 |   |         |   | 173,326 |   |
| Total real estate               |   |      | 412,257 |   |         |   | 415,457 |   |
| Commercial and industrial loans |   |      | 62,728  |   |         |   | 66,254 |   |
| Consumer                        |   |      | 4,194   |   |         |   | 4,484 |   |
|                            |   |      | 479,179 |   |         |   | 486,195 |   |
| Allowance for loan losses       |   |      | (13,905 | )      |         |   | (16,191 | ) |
| Total                           |   | $         | 465,274 |   |         | $      | 470,004 |   |

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| (dollars in thousands)          |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|--------|-------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
|                                                                         |   | Actual |   |   | For Capital Adequacy Purposes |   |   | Under Prompt Corrective Action Provisions |   |
|                                                                         |   | Amount |   |   | Ratio                         |   |   | Amount                                    |   |   | Ratio  |   |   | Amount |   |    | Ratio  |   |
| As of March 31, 2011                                                         |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |
| Total Capital (to Risk-weighted Assets)                                      |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |
| Company                                                                      |   | $      | 39,144 |   |                          |   | 8.43   | %                                         |   | $      | 37,150 |   |   |   | 8.00   | %       |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                         |   |   | 39,072 |   |                          |   | 8.41   | %                                    |   |   | 37,149 |   |   |   | 8.00   | %  |   | $      | 46,436 |   |   |   | 10.00 | %  |
| Tier I Capital (to Risk-weighted Assets)                                     |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Company                                                                      |   | $      | 33,239 |   |                          |   | 7.16   | %                                         |   | $      | 18,575 |   |   |   | 4.00   | %       |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                         |   |   | 33,167 |   |                          |   | 7.14   | %                                    |   |   | 18,575 |   |   |   | 4.00   | %  |   | $      | 27,862 |   |   |   | 6.00 | %  |
| Tier I Capital (to Average Assets)                                           |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Company                                                                      |   | $      | 33,239 |   |                          |   | 4.68   | %                                         |   | $      | 28,414 |   |   |   | 4.00   | %       |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                         |   |   | 33,167 |   |                          |   | 4.67   | %                                    |   |   | 28,411 |   |   |   | 4.00   | %  |   | $      | 35,514 |   |   |   | 5.00 | %  |
| As of December 31, 2010                                                      |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Total Capital (to Risk-weighted Assets)                                      |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Company                                                                      |   | $      | 38,410 |   |                          |   | 8.04   | %                                         |   | $      | 38,242 |   |   |   | 8.00   | %       |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                         |   |   | 38,397 |   |                          |   | 8.03   | %                                         |   |   | 38,237 |   |   |   | 8.00   | %       |   | $      | 47,796 |   |   |   | 10.00 | % |
| Tier I Capital (to Risk-weighted Assets)                                     |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Company                                                                      |   | $      | 32,308 |   |                          |   | 6.76   | %                                         |   | $      | 19,121 |   |   |   | 4.00   | %       |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                         |   |   | 32,297 |   |                          |   | 6.76   | %                                         |   |   | 19,119 |   |   |   | 4.00   | %       |   | $      | 28,679 |   |   |   | 6.00 | % |
| Tier I Capital (to Average Assets)                                           |   |   |   |   |                          |   |   |                                      |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Company                                                                      |   | $      | 32,308 |   |                          |   | 4.30   | %                                         |   | $      | 30,060 |   |   |   | 4.00   | %       |   |   | n/a |   |   |   | n/a |   |
| Bank                                                                         |   |   | 32,297 |   |                          |   | 4.30   | %                                    |   |   | 30,057 |   |   |   | 4.00   | %  |   | $      | 37,571 |   |   |   | 5.00 | %  |

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| (dollars in thousands)                                    |   |      |   |   |         |   |
|-----------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                                      |   | March 31, |   |   | December 31, |   |
|                                                      |   | 2011      |   |   | 2010         |   |
| Nonaccrual loans                                          |   | $         | 44,371 |   |         | $      | 37,799 |   |
| Loan past due 90 or more days and still accruing interest |   |      | -      |   |         |   | 5 |   |
| Total nonperforming loans                                 |   |      | 44,371 |   |         |   | 37,804 |   |
| Foreclosed real estate                                    |   |      | 5,942  |   |         |   | 7,314 |   |
| Repossessed assets                                        |   |      | 7      |   |         |   | 7 |   |
| Total nonperforming assets                                |   | $         | 50,320 |   |         | $      | 45,125 |   |
| Allowance for loan losses                                 |   | $         | 13,905 |   |         | $      | 16,191 |   |
| Nonperforming loans to period-end loans,                  |   |      |   |   |         |   |   |   |
| excluding loans held for sale                             |   |      | 9.26   | %      |         |   | 7.78 | % |
| Allowance for loan losses to period-end loans,            |   |      |   |   |         |   |   |   |
| excluding loans held for sale                             |   |      | 2.90   | %      |         |   | 3.33 | % |
| Nonperforming assets as a percentage of:                  |   |      |   |   |         |   |   |   |
| Loans and foreclosed real estate                          |   |      | 10.37  | %      |         |   | 9.14 | % |
| Total assets                                              |   |      | 6.89   | %      |         |   | 6.23 | % |
| Ratio of allowance for loan losses to nonperforming loans |   |      | 31.3   | %      |         |   | 42.8 | % |

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| (dollars in thousands)                          |   |                        |    |   |   |   |
|-------------------------------------------------|--------|-----------------------------|---------|--------|--------|--------|
|                                            |   | Three Months Ended March 31 |    |
|                                            |   | 2011                        |    |   | 2010   |   |
| Balance at beginning of the period              |   | $                           | 16,191  |   |   | $      | 28,231 |   |
| Provision for loan losses                       |   |                        | 686     |   |   |   | 300 |   |
| Charge-offs                                     |   |                        |    |   |   |   |   |   |
| Construction and development                    |   |                        | 2,096   |   |   |   | 990 |   |
| 1-4 family residential                          |   |                        | 297     |   |   |   | 1,339 |   |
| Multifamily                                     |   |                        | -       |   |   |   | 184 |   |
| Nonfarm, non residential                        |   |                        | 32      |   |   |   | 216  |   |
| Total real estate                               |   |                        | 2,425   |   |   |   | 2,729 |   |
| Commercial                                      |   |                        | 573     |   |   |   | 282 |   |
| Consumer                                        |   |                        | 17      |   |   |   | 175 |   |
| Total charge-offs                               |   |                        | 3,015   |   |   |   | 3,186 |   |
| Recoveries                                      |   |                        |    |   |   |   |   |   |
| Construction and development                    |   |                        | -       |   |   |   | 327 |   |
| 1-4 family residential                          |   |                        | 3       |   |   |   | 3 |   |
| Nonfarm, non residential                        |   |                        | -       |   |   |   | - |   |
| Total real estate                               |   |                        | 3       |   |   |   | 330 |   |
| Commercial                                      |   |                        | 36      |   |   |   | 13 |   |
| Consumer                                        |   |                        | 4       |   |   |   | 3 |   |
| Total recoveries                                |   |                        | 43      |   |   |   | 346 |   |
| Net charge-offs                                 |   |                        | 2,972   |   |   |   | 2,840 |   |
| Balance at end of period                        |   | $                           | 13,905  |   |   | $      | 25,691 |   |
| Average loans, excluding loans held for sale    |   | $                           | 481,768 |   |   | $      | 548,946 |   |
| Period end loans, excluding loans held for sale |   | $                           | 479,179 |   |   | $      | 539,318 |   |
| Net charge-offs to average loans,               |   |                        |    |   |   |   |   |   |
| excluding loans held for sale (1)               |   |                        | 2.47    | %      |   |   | 2.07 | % |
| Allowance for loan losses to period end loans,  |   |                        |    |   |   |   |   |   |
| excluding loans held for sale                   |   |                        | 2.90    | %      |   |   | 4.76 | % |

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| Allocation of the Allowance for Loan Losses |   |           |   |   |              |   |
|---------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
| (dollars in thousands)                      |   |           |   |   |              |   |
|                                        |   | March 31, 2011 |   |   | December 31, 2010 |   |
|                                        |   |           |   |   | Percent           |   |   |   |   |   | Percent |   |
|                                        |   |           |   |   | of Total          |   |   |   |   |   | of Total |   |
|                                        |   | Amount         |   |   | Loans (1)         |   |   | Amount |   |   | Loans (1) |   |
| Construction loans                          |   | $              | 5,758  |   |              |   | 23.2 | % |   | $ | 8,499 |   |   |   | 23.6 | % |
| 1-4 family residential                      |   |           | 4,005  |   |              |   | 25.1 | % |   |   | 4,370 |   |   |   | 24.7 | % |
| Multifamily                                 |   |           | 32     |   |              |   | 1.2 | % |   |   | 35 |   |   |   | 1.3 | % |
| Farmland                                    |   |           | 13     |   |              |   | 0.2 | % |   |   | 12 |   |   |   | 0.2 | % |
| Nonfarm, nonresidential                     |   |           | 1,693  |   |              |   | 36.3 | % |   |   | 1,798 |   |   |   | 35.7 | % |
| Total real estate loans                     |   |           | 11,501 |   |              |   | 86.0 | % |   |   | 14,714 |   |   |   | 85.5 | % |
| Commercial and industrial loans             |   |           | 2,341  |   |              |   | 13.1 | % |   |   | 1,413 |   |   |   | 13.6 | % |
| Consumer                                    |   |           | 63     |   |              |   | 0.9 | % |   |   | 64 |   |   |   | 0.9 | % |
| Unallocated                                 |   |           | -      |   |              |   | - |   |   |   | - |   |   |   | - |   |
| Total                                       |   | $              | 13,905 |   |              |   | 100.0 | % |   | $ | 16,191 |   |   |   | 100.0 | % |

| (1) | Percent of loans in each category to total loans |
|-----|--------------------------------------------------|

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| Average Balances and Net Interest Income      |   |                              |    |
|-----------------------------------------------|--------|-----------------------------------|---------|
| (dollars in thousands)                        |   |                              |    |
|                                          |   |  Three Months Ended March 31 |    |
|                                          |   | 2011                              |    |   |  2010 |   |
|                                          |   | Average                           |    |   | Interest |   |   |   |   |   | Average |   |   | Interest |   |   |   |   |
|                                          |   | Daily                             |    |   | Income/ |   |   | Average |   |   | Daily |   |   | Income/ |   |   | Average |   |
|                                          |   | Balance                           |    |   | Expense(1)(2) |   |   | Rate |   |   | Balance |   |   | Expense(1)(2) |   |   | Rate |   |
| Interest-earning assets                       |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans and loans held for sale                 |   | $                                 | 485,874 |   |   | $ | 6,082 |   |   |   | 5.01 | % |   | $ | 552,016 |   |   | $ | 7,175 |   |   |   | 5.20 | % |
| Investment securities                         |   |                              | 141,406 |   |   |   | 1,004 |   |   |   | 2.84 | % |   |   | 102,646 |   |   |   | 544 |   |   |   | 2.12 | % |
| Due from Federal Reserve Bank                 |   |                              | 36,729  |   |   |   | 21 |   |   |   | 0.23 | % |   |   | 135,729 |   |   |   | 78 |   |   |   | 0.23 | % |
| Interest-earning cash deposits                |   |                              | 6,474   |   |   |   | 18 |   |   |   | 1.13 | % |   |   | 54 |   |   |   | - |   |   |   | - | % |
| Total interest-earning assets                 |   |                              | 670,483 |   |   |   | 7,125 |   |   |   | 4.25 | % |   |   | 790,445 |   |   |   | 7,797 |   |   |   | 3.95 | % |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning assets:                   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and due from banks                       |   |                              | 15,802  |   |   |   |   |   |   |   |   |   |   |   | 10,023 |   |   |   |   |   |   |   |   |   |
| Property and equipment                        |   |                              | 5,795   |   |   |   |   |   |   |   |   |   |   |   | 5,842 |   |   |   |   |   |   |   |   |   |
| Interest receivable and other                 |   |                              | 22,734  |   |   |   |   |   |   |   |   |   |   |   | 4,815 |   |   |   |   |   |   |   |   |   |
| Total noninterest-earning assets              |   |                              | 44,331  |   |   |   |   |   |   |   |   |   |   |   | 20,680 |   |   |   |   |   |   |   |   |   |
| Total assets                                  |   | $                                 | 714,814 |   |   |   |   |   |   |   |   |   |   | $ | 811,125 |   |   |   |   |   |   |   |   |   |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities                  |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW accounts                                  |   |                              | 62,905  |   |   |   | 48 |   |   |   | 0.31 | % |   |   | 60,131 |   |   |   | 52 |   |   |   | 0.35 | % |
| Money markets                                 |   |                              | 48,370  |   |   |   | 130 |   |   |   | 1.09 | % |   |   | 43,387 |   |   |   | 152 |   |   |   | 1.42 | % |
| Savings deposits                              |   |                              | 113,291 |   |   |   | 296 |   |   |   | 1.06 | % |   |   | 89,922 |   |   |   | 246 |   |   |   | 1.11 | % |
| Time deposits                                 |   |                              | 374,217 |   |   |   | 1,556 |   |   |   | 1.69 | % |   |   | 435,912 |   |   |   | 2,174 |   |   |   | 2.02 | % |
| Federal funds purchased/repurchase agreements |   |                              | 864     |   |   |   | 2 |   |   |   | 0.94 | % |   |   | 1,043 |   |   |   | 2 |   |   |   | 0.78 | % |
| Borrowings                                    |   |                              | 3,953   |   |   |   | 11 |   |   |   | 1.13 | % |   |   | 70,000 |   |   |   | 179 |   |   |   | 1.04 | % |
| Total interest-bearing liabilities            |   |                              | 603,600 |   |   |   | 2,043 |   |   |   | 1.37 | % |   |   | 700,395 |   |   |   | 2,805 |   |   |   | 1.62 | % |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing liabilities:              |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                               |   |                              | 68,502  |   |   |   |   |   |   |   |   |   |   |   | 61,553 |   |   |   |   |   |   |   |   |   |
| Interest payable and other                    |   |                              | 5,441   |   |   |   |   |   |   |   |   |   |   |   | 5,101 |   |   |   |   |   |   |   |   |   |
| Total noninterest-bearing liabilities         |   |                              | 73,943  |   |   |   |   |   |   |   |   |   |   |   | 66,654 |   |   |   |   |   |   |   |   |   |
| Total liabilities                             |   |                              | 677,543 |   |   |   |   |   |   |   |   |   |   |   | 767,049 |   |   |   |   |   |   |   |   |   |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                          |   |                              | 37,271  |   |   |   |   |   |   |   |   |   |   |   | 44,076 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity    |   | $                                 | 714,814 |   |   |   |   |   |   |   |   |   |   | $ | 811,125 |   |   |   |   |   |   |   |   |   |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income and interest rate spread  |   |                              |    |   |   | $ | 5,082 |   |   |   | 2.88 | % |   |   |   |   |   | $ | 4,992 |   |   |   | 2.32 | % |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on average interest-earning assets  |   |                              |    |   |   |   |   |   |   |   | 3.02 | % |   |   |   |   |   |   |   |   |   |   | 2.51 | % |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of average interest-earning assets to   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average interest-bearing liabilities          |   |                              | 111.08  | % |   |   |   |   |   |   |   |   |   |   | 112.86 | % |   |   |   |   |   |   |   |   |
|                                          |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | Interest income includes amortization of deferred loan fees, net. |
|-----------------|-------------------------------------------------------------------|

| (2)   | Nonaccrual loans are included in gross loans but interest is not included in interest income. |
|-----------------|-----------------------------------------------------------------------------------------------|

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| Volume and Rate Variance Analysis              |   |                        |   |   |                        |   |
|------------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|
| (in thousands)                                 |   |                        |   |   |                        |   |
|                                           |   | Three Months Ended March 31 |   |   | Three Months Ended March 31 |   |
|                                           |   |  2011 vs 2010          |   |   |  2010 vs 2009          |   |
|                                           |   | Increase (Decrease) Due to  |   |   | Increase (Decrease) Due to  |   |
|                                           |   | Volume                      |   |   | Rate                        |   |   | Total |   | Volume |   |   | Rate |   |   | Total |   |
| Interest income:                               |   |                        |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, including loans held for sale           |   | $                           | (835   | )      |                        | $      | (258 | ) |   | $ | (1,093 | ) |   | $ | (423 | ) |   | $ | (199 | ) |   | $ | (622 | ) |
| Investment securities                          |   |                        | 242    |   |                        |   | 218 |   |   |   | 460 |   |   |   | 152 |   |   |   | (516 | ) |   |   | (364 | ) |
| Federal funds sold                             |   |                        | -      |   |                        |   | - |   |   |   | - |   |   |   | (2 | ) |   |   | - |   |   |   | (2 | ) |
| Due from Federal Reserve Bank                  |   |                        | (57    | )      |                        |   | - |   |   |   | (57 | ) |   |   | 78 |   |   |   | - |   |   |   | 78 |   |
| Interest-bearing bank deposits                 |   |                        | 15     |   |                        |   | 3 |   |   |   | 18 |   |   |   | - |   |   |   | - |   |   |   | 0 |   |
| Total interest income                          |   |                        | (635   | )      |                        |   | (37 | ) |   |   | (672 | ) |   |   | (195 | ) |   |   | (715 | ) |   |   | (910 | ) |
| Interest expense:                              |   |                        |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW accounts                                   |   | $                           | 2      |   |                        | $      | (6 | ) |   | $ | (4 | ) |   | $ | (2 | ) |   | $ | - |   |   | $ | (2 | ) |
| Money markets                                  |   |                        | 16     |   |                        |   | (38 | ) |   |   | (22 | ) |   |   | (2 | ) |   |   | (1 | ) |   |   | (3 | ) |
| Savings deposits                               |   |                        | 62     |   |                        |   | (12 | ) |   |   | 50 |   |   |   | 86 |   |   |   | (129 | ) |   |   | (43 | ) |
| Time deposits                                  |   |                        | (284   | )      |                        |   | (334 | ) |   |   | (618 | ) |   |   | 1,163 |   |   |   | (1,628 | ) |   |   | (465 | ) |
| Federal funds purchased and securities         |   |                        |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sold under agreements to repurchase            |   |                        | -      |   |                        |   | - |   |   |   | - |   |   |   | (1 | ) |   |   | - |   |   |   | (1 | ) |
| Other borrowings                               |   |                        | (197   | )      |                        |   | 29 |   |   |   | (168 | ) |   |   | - |   |   |   | 129 |   |   |   | 129 |   |
| Total interest expense                         |   |                        | (401   | )      |                        |   | (361 | ) |   |   | (762 | ) |   |   | 1,244 |   |   |   | (1,629 | ) |   |   | (385 | ) |
| Net increase (decrease) in net interest income |   | $                           | (234   | )      |                        | $      | 324 |   |   | $ | 90 |   |   | $ | (1,439 | ) |   | $ | 914 |   |   | $ | (525 | ) |

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| Noninterest Income                                 |   |                        |   |
|----------------------------------------------------|--------|-----------------------------|--------|
| (in thousands)                                     |   |                        |   |
|                                               |   | Three Months Ended March 31 |   |
|                                               |   | 2011                        |   |   | 2010 |   |
| Service charges on deposit accounts                |   | $                           | 591    |   |   | $ | 535 |   |
| Mortgage services revenue                          |   |                        | 570    |   |   |   | 323 |   |
| Other service charges and fees                     |   |                        | 147    |   |   |   | 111 |   |
| Increase in cash surrender value of life insurance |   |                        | 107    |   |   |   | 113 |   |
| Gain on sale of investment securities, net         |   |                        | 9      |   |   |   | 123 |   |
| USDA/SBA loan sale and servicing revenue           |   |                        | 212    |   |   |   | 21 |   |
| Other income                                       |   |                        | 29     |   |   |   | 5 |   |
| Total                                              |   | $                           | 1,665  |   |   | $ | 1,231 |   |

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| Noninterest Expense                    |   |                        |   |
|----------------------------------------|--------|-----------------------------|--------|
| (in thousands)                         |   |                        |   |
|                                   |   | Three Months Ended March 31 |   |
|                                   |   | 2011                        |   |   | 2010 |   |
| Salaries and employee benefits         |   | $                           | 2,352  |   |   | $ | 2,456 |   |
| Occupancy                              |   |                        | 368    |   |   |   | 416 |   |
| Equipment                              |   |                        | 245    |   |   |   | 324 |   |
| Advertising                            |   |                        | 52     |   |   |   | 148 |   |
| Data processing and telecommunications |   |                        | 511    |   |   |   | 481 |   |
| Deposit insurance premiums             |   |                        | 550    |   |   |   | 660 |   |
| Professional fees                      |   |                        | 157    |   |   |   | 235 |   |
| Printing and supplies expense          |   |                        | 44     |   |   |   | 68 |   |
| Foreclosed real estate                 |   |                        | 361    |   |   |   | 194 |   |
| Loan legal                             |   |                        | 130    |   |   |   | 29 |   |
| Loan appraisal                         |   |                        | 86     |   |   |   | 34 |   |
| Corporate insurance                    |   |                        | 51     |   |   |   | 18 |   |
| Other                                  |   |                        | 311    |   |   |   | 361 |   |
| Total                                  |   | $                           | 5,218  |   |   | $ | 5,424 |   |

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|                       |   |                                               |   |
|----------------------------|--------|----------------------------------------------------|--------|
|                       |   | Percentage Change in Net Interest Income from Base |   |
|                       |   | Immediate Shock                                    |   |   | Gradual Ramp |   |
| Interest Rate Scenario (1) |   | 12 Months                                          |   |   | 24 Months |   |   | 12 Months |   |   | 24 Months |   |
|                       |   | Column 1                                           |   |   | Column 2 |   |   | Column 3 |   |   | Column 4 |   |
| Up 400 basis points        |   |                                               | 10.5   | % |   |   | 1.5 | % |   |   | 5.5 | % |   |   | 9.5 | % |
| Up 300 basis points        |   |                                               | 8.3    | % |   |   | 1.7 | % |   |   | 4.0 | % |   |   | 7.2 | % |
| Up 200 basis points        |   |                                               | 6.0    | % |   |   | 1.9 | % |   |   | 2.9 | % |   |   | 5.2 | % |
| Base                       |   |                                               | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Down 200 basis points      |   |                                               | -16.4  | % |   |   | -15.8 | % |   |   | -4.3 | % |   |   | -6.9 | % |
| Down 300 basis points      |   |                                               | -28.9  | % |   |   | -32.2 | % |   |   | -5.5 | % |   |   | -13.7 | % |
| Down 400 basis points      |   |                                               | -29.4  | % |   |   | -33.5 | % |   |   | -9.9 | % |   |   | -22.2 | % |

|  (1) | The rising and falling interest rate scenarios in the first two columns assume an immediate and parallel change in interest rates along the entire yield curve.  The gradual ramp scenarios presented in the third and fourth columns assume a gradual rise or fall in interest rates during the periods indicated. |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | It presents the balance sheet in a static position. When assets and liabilities mature or reprice, they do not necessarily keep the same characteristics. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | The computation of prospective impacts of hypothetical interest rate changes are based on numerous assumptions and should not be relied upon as indicative of actual results. |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | The computations do not contemplate any additional actions we could undertake in response to changes in interest rates. |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------|

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ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.   CONTROLS AND PROCEDURES

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PART II – OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

ITEM 4.   (REMOVED AND RESERVED)

ITEM 5.   OTHER INFORMATION

ITEM 6.   EXHIBITS

| 31.01  |   | Rule 13a-14(a)/15(d)-14(a) Certification by Michael G. Mayer   |
|--------|--------|----------------------------------------------------------------|
|   |   |                                                           |
| 31.02  |   | Rule 13a-14(a)/15(d)-14(a) Certification by Holly L. Schreiber |
|   |   |                                                           |
| 32.01  |   | Rule 1350 Certifications                                       |

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SIGNATURES

|               | 1st Financial Services Corporation(Registrant) |                      |
|--------------------|------------------------------------------------|---------------------------|
|               |                                           |                      |   |
| Date: May 16, 2011 | By:                                            | /s/ Michael G. Mayer |   |
|               |                                           | Michael G. Mayer          |   |
|               |                                           | Chief Executive Officer   |   |

| Date: May 16, 2011  | By:    | /s/ Holly L. Schreiber |   |
|--------------------------|--------|-----------------------------|--------|
|                     |   | Holly L. Schreiber          |   |
|                     |   | Chief Financial Officer     |   |

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EXHIBIT INDEX

| ExhibitNumber |   | Description                                                    |
|---------------|--------|----------------------------------------------------------------|
|          |   |                                                           |
| 31.01         |   | Rule 13a-14(a)/15(d)-14(a) Certification by Michael G. Mayer   |
|          |   |                                                           |
| 31.02         |   | Rule 13a-14(a)/15(d)-14(a) Certification by Holly L. Schreiber |
|          |   |                                                           |
| 32.01         |   | Rule 1350 Certifications                                       |